Arbitration Agreement That Provides For Fees To Prevailing Party, Contrary To The FLSA, Is Unenforceable

In Hernandez v. Colonial Grocers, Inc. (2D11-3415), the Second District determined an arbitration provision was invalid because it conflicted with the relief afforded by the relevant federal statute. The plaintiff filed a lawsuit asserting violations of the "Fair Labor Standards Act [29 U.S.C. § 216(b)] and section 440.205, Florida Statutes (2010), of the Florida Workers' Compensation Act.” The trial court granted the defendant's motion to compel arbitration pursuant to a provision of the employment contract. That arbitration clause included the following language: “...Although the parties shall initially bear the cost of arbitration equally, the prevailing party, if any as determined by the arbitrator at the request of the parties which is hereby deemed made, shall be entitled to reimbursement for its share of costs and reasonable attorneys' fees, as well as interest at the statutory rate.” 

The Second District first rejected the appellant’s argument that Flyer Printing Co. v. Hill, 805 So. 2d 829 (Fla. 2d DCA 2001) provided "a bright-line rule that any fee-splitting provision renders an arbitration clause unenforceable.”

The court stated that "Hernandez also argues on appeal that the instant arbitration agreement is unenforceable because it includes a prevailing party attorney's fee provision that contradicts the attorney's fee provision of the statute under which he brought suit.” As to that second issue, Flyer Printing did require reversal. 

Here, Hernandez brought suit under the federal Fair Labor Standards Act and the Florida Workers' Compensation Law. The federal act states that a prevailing plaintiff is entitled to an award of reasonable attorney's fees, but it does not allow for prevailing party fees for the defendant. 29 U.S.C. § 216(b). The instant arbitration agreement, however, states that whichever party prevails "shall be entitled to reimbursement for its share of costs and reasonable attorneys' fees." Accordingly, should the arbitrator declare Colonial the prevailing party, Hernandez would be obligated under the arbitration agreement to pay Colonial's attorney's fees. This renders the potential cost of arbitration to be far greater to Hernandez than the potential cost of civil litigation, which under no circumstances would include Colonial's attorney’s fees. As such, while the parties' agreement may not contravene any of Hernandez’s rights under the federal act, it does expose him to a potential liability to which he would not be exposed if the litigation occurred in civil court because the federal statute specifically protects him from such liability.

"This is a sufficient enough chilling effect to defeat the remedial purpose of the federal act. The attorney's fees provision of the Fair Labor Standards Act is intended to encourage employees to seek redress when they believe they have been wronged by an employer. The arbitration agreement, however, does just the opposite— it discourages the employee from pursuing a claim. As such, under Flying Printing, it is unenforceable."

3rd DCA Reverses Itself Over Arbitration Award

The Daily Business Review has an article today titled "3rd DCA Reverses Itself Over Arbitration Award." A subscription is currently required to view the article. The article is about THIS opinion that released last Wednesday by the Third District. The one sentence opinion on rehearing vacated THIS six page opinion by Judge Fernandez. The earlier opinion included a 12 page dissent by Judge Salter. While the new unanimous opinion does not explain its reasoning, presumably Judge Salter's earlier dissent played a part. That dissent began:

I respectfully dissent. We should not engage in the very judicial proceedings that these international companies sought to avoid when they specified in their commission agreement that “[a]ny dispute or controversy arising in connection with this Agreement shall be subject to (and settled by) final and binding arbitration.” The threshold or “gatekeeper” determination regarding Mr. Rondon’s authority to initiate Ventus’s demand for arbitration, made here and now by the majority (after, and contrary to, the International Centre for Dispute Resolution Tribunal’s ruling on that very point), was a “controversy arising in connection with the agreement” that was properly heard and ruled upon by the tribunal and should not be revisited, much less nullified, by a Florida appellate court. The circuit court ruled in accordance with the deferential and extremely limited scope of review specified by the Florida and counterpart federal arbitration statutes (as interpreted by the Florida Supreme Court), such that the order confirming the Tribunal’s detailed and closely-reasoned award should be affirmed.

Florida Supreme Court Issues Second Arbitration Opinion Of Day - Public Policy Challenge Decided By Court

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."

Severability

"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

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

"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].

Florida Supreme Court Holds Court Not Arbitrator Determines Whether Agreement Violates Public Policy

In Shotts v. OP Winter Haven, Inc. (SC08-1774), the Florida Supreme Court held:

1. "That the district court below erred in failing to rule that the court, not the arbitrator, must decide whether the arbitration agreement violates public policy.";
2. "That the district court below erred in failing to rule that the limitations of remedies provisions in this case violate public policy, for they directly undermine specific statutory remedies created by the Legislature.";
3. "That the district court below erred in ruling that the limitations of remedies provision that calls for imposition of the AHLA rules is severable."; and
4. "Finally, we conclude that the United States Supreme Court's recent decision in Rent-A-Center, West, Inc. v. Jackson, 130 S. Ct. 2772 (2010), is inapplicable here."

Justice Perry wrote the majority opinion which was joined by Justice Lewis, Justice Quince and Justice Labarga. Justice Pariente concurred in result. Justice Polston wrote a dissenting opinion which was joined by Chief Justice Canady. This is one of two arbitration opinions released today. The other, Gessa v. Manor Care of Florida, Inc. (SC09-768), is discussed HERE.

In this case, "Edward Clark was involved in an automobile accident in 1977, and he sustained brain damage. For many years, Clark's care was provided by his niece, Gayle Shotts, in her home. Eventually, Clark was admitted to OP Winter Haven, Inc., a nursing home in Florida. He remained there until his death in 2003, at which time Shotts, as his personal representative, filed a complaint against OP Winter Haven alleging negligence and breach of fiduciary duties. OP Winter Haven moved to compel arbitration based on an agreement Shotts had signed on Clark‟s admission. The agreement contained the following 'limitations of remedies' provisions: (i) the arbitration will be conducted in accordance with the American Health Lawyers Association (AHLA) rules; and (ii) the arbitrators will have no authority to award punitive damages. The agreement also stated that its terms were severable. At the hearing on the motion to compel, Shotts argued that the agreement was unenforceable because it was unconscionable and violated public policy. The trial court granted the motion, and the district court affirmed. Shotts sought discretionary review, which we granted."

The majority stated:

This Court in Seifert v. U.S. Home Corp., 750 So. 2d 633 (Fla. 1999), held that, in a hearing on a motion to compel arbitration, the inquiry follows the same three-step process regardless whether the inquiry is conducted under the FAC or the FAA: Under both federal statutory provisions and Florida's arbitration code, 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, 750 So. 2d at 636.....

With respect to which contract defenses—besides “fraud, duress or unconscionability”—constitute “generally applicable contract defenses” for purposes of section 2, we conclude that public policy clearly is such a defense, for if an arbitration agreement violates public policy, no valid agreement exists. “[T]he rights of access to courts and trial by jury may be contractually relinquished [via an arbitration agreement], subject to defenses to contract enforcement including voidness for violation of the law or public policy, unconscionability, or lack of consideration. . . . No valid agreement exists if the arbitration clause is unenforceable on public policy grounds.” 

[emphasis from the Court].

Public Policy Challenge - Court or Arbitrator

As to the issue framed above, the Court stated: "Although this Court has not confronted the specific issue of whether the court or the arbitrator must decide whether an arbitration agreement violates public policy, the Court in Seifert has ruled that it is for the court, not the arbitrator, to decide 'whether a valid written agreement to arbitrate exists.'”

...this Court in Seifert held that it was for the court, not the arbitrator, to determine “whether a valid written agreement to arbitrate exists,” Seifert, 750 So. 2d at 636 (emphasis added), and we later explained the meaning of the term “valid” in this context, with respect to arbitration and public policy: “No valid agreement exists if the arbitration clause is unenforceable on public policy grounds.” Global Travel, 908 So. 2d at 398. Thus, under Siefert and Global Travel, it is incumbent on the court, not the arbitrator, to determine whether an arbitration agreement violates public policy. This conclusion is consistent with the vast weight of authority in Florida, as discussed above.

[emphasis is mine].

Limitation of Remedies

On the issue of limitation of remedies, the court stated: "the arbitration agreement in the present case contains the following limitations of remedies provisions: (1) “[t]he arbitration shall be conducted in accordance with the American Health Lawyers Association (“AHLA”) Alternative Dispute Resolution Service Rules of Procedure for Arbitration”; and (2) “the arbitrators shall have no authority to award punitive damages.” The district court below did not decide whether these provisions violate public policy, but rather left that matter for the arbitrator to determine." The court concluded:

Based on the foregoing, we conclude that the limitations of remedies provisions in the present case violate public policy, for they directly undermine specific statutory remedies created by the Legislature. See §§ 400.022, 400.023, Fla. Stat. (2003)....In light of the recognized need for these remedies and the salutary purpose they serve, we conclude that any arbitration agreement that substantially diminishes or circumvents these remedies stands in violation of the public policy of the State of Florida and is unenforceable. In this respect, we find the rationale of the Fourth District Court of Appeal in Blankfeld and Romano cogent and compelling. Under the above standard of review, we hold that the district court below erred in failing to rule that the limitations of remedies provisions in the present case violate public policy.

Serverability

"In this claim Shotts contends that the district court below erred in ruling that the limitations of remedies provisions in the present case are severable.The trial court below held that the provisions were not severable. The district court reversed. The district court held that, if the arbitrator were to conclude that these provisions violate public policy, they are severable. Shotts contends that the district court erred in so ruling—she contends that these limitations of remedies provisions violate public policy and are not severable. We agree." The court concluded: "Based on the foregoing, we conclude that the limitations of remedies provision in the present case that calls for the imposition of the AHLA rules is not severable from the remainder of the agreement. Although the arbitration agreement in this case contains a severability clause, the AHLA provision goes to the very essence of the agreement. If the provision were to be severed, the trial court would be forced to rewrite the agreement and to add an entirely new set of procedural rules and burdens and standards, a job that the trial court is not tasked to do."

Rent-A-Center v. Jackson

"Approximately two weeks after this Court heard oral argument in the present case, the United States Supreme Court issued its decision in Rent-A-Center, West, Inc. v. Jackson, 130 S. Ct. 2772 (2010)....[and] held that, where there has been no specific challenge to the delegation provision, the arbitrator, not the court, must decide the issue."

The Florida Supreme Court concluded that: "In the present case, because the arbitration agreement contained no delegation provision, there was no such provision for Shotts to challenge. Instead, she challenged the arbitration agreement itself. This was the proper course of action under the section 2 template, for unlike the situation in Jackson, the entire arbitration agreement in the present case operated as the “written provision . . . to settle by arbitration a controversy,” in the section 2 lexicon."

The Dissent

The dissent began "Because the majority's opinion seriously violates the Federal Arbitration Act and its accompanying federal substantive law, I respectfully dissent....Once again, this Court erroneously applies Florida law to invalidate an arbitration agreement in violation of the Federal Arbitration Act. See Cardegna v. Buckeye Check Cashing, Inc., 894 So. 2d 860 (Fla. 2005) (applying Florida law to hold that Florida courts rather than an arbitrator should make determination), rev'd, Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 446 (2006) (rejecting “the Florida Supreme Court's conclusion that enforceability of the arbitration agreement should turn on „Florida public policy and contract law,‟ 894 So. 2d at 864”). As provided by the Federal Arbitration Act (FAA), the arbitration agreement should be enforced as agreed by the parties, not stricken at the whim of this Court." [emphasis is mine]. 

Florida Statute Of Limitations Does Not Apply In Arbitration Unless Specifically Included In Agreement

In Raymond James Financial Services, Inc. v. Phillips (2D10-2144), the Second District affirmed the trial court's order and held that Florida's statute of limitations do not apply to arbitration proceedings unless the contract specifically incorporates the statute of limitations into the arbitration clause. Judge Black and Associate Judge Raiden concurred in the per curiam opinion and Judge Kelly dissented. The court also certified the following question to the Florida Supreme Court as one of great public importance:

Does Section 95.011, Florida Statutes, Apply To Artbitration When The Parties Have Not Expressly Included A Provision In Their Arbitration Agreement Stating That It Is Applicable?

The facts were described as follows:

The Account Holders' grievances may briefly be summarized as claims of negligence; misconduct, including breaches of fiduciary duty; and state and federal securities violations. In response to the Account Holders' claims, Raymond James filed a motion to dismiss, asserting that the Account Holders' claims were barred by the limitations periods in chapter 95, Florida Statutes (2005). The Account Holders then invoked the provision in the arbitration agreement which stated that timeliness issues would be decided by the court, and they filed an action in the circuit court of Collier County seeking a declaratory judgment. The Account Holders argued that Florida's statutes of limitations do not apply to arbitration proceedings. The circuit court agreed and issued a final declaratory judgment stating that Florida's statutes of limitations were not applicable to the Account Holders' arbitration claims as a matter of law.

***

The language of the contract at issue in this case does not expressly state that Florida’s statutes of limitations apply to the arbitration claims. Instead, the language states that the contract will not "limit or waive the application of any relevant state or federal statute of limitation." The Account Holders argue, and we agree, that this phrase does not affirmatively incorporate Florida's statutes of limitations into the agreement. The phrase indicates that Raymond James did not intend to waive any relevant statute of limitations defenses.

The court concluded:

In sum, Raymond James did not expressly include the Florida statutes of limitations in the contract. Since the contract is construed against the drafter and since the language of the statute does not state that it applies to arbitration, we hold that Florida's statutes of limitations do not apply to arbitrations where the arbitration agreement does not expressly provide for their application. Thus, the trial court correctly determined that Florida's statutes of limitation do not bar the Account Holders' claims.

U.S. Supreme Court Vacates 4th DCA Arbitration Opinion About Madoff Claims

On December 22, 2010, I posted about the Fourth DCA's decision in KPMG, LLP v. Cocchi, et al (4D09-4867 & 4D10-988). The post can be viewed HERE. Today, the United States Supreme Court released a unanimous opinion vacating the Fourth District's opinion. The Supreme Court's opinion in KPMG LLP v. Cocchi states, in part:

Agreements to arbitrate that fall within the scope andcoverage of the Federal Arbitration Act (Act), 9 U. S. C. §1 et seq., must be enforced in state and federal courts. State courts, then, “have a prominent role to play as enforcersof agreements to arbitrate.” Vaden v. Discover Bank, 556 U. S. 49, 59 (2009).

The Act has been interpreted to require that if a disputepresents multiple claims, some arbitrable and some not,the former must be sent to arbitration even if this will lead to piecemeal litigation. See Dean Witter Reynolds Inc. v. Byrd, 470 U. S. 213, 217 (1985). From this it follows that state and federal courts must examine with care the complaints seeking to invoke their jurisdiction in orderto separate arbitrable from nonarbitrable claims. A court may not issue a blanket refusal to compel arbitration merely on the grounds that some of the claims could beresolved by the court without arbitration. See ibid.

In this case the Fourth District Court of Appeal of the State of Florida upheld a trial court’s refusal to compel arbitration of respondents’ claims after determining thattwo of the four claims in a complaint were nonarbitrable.Though the matter is not altogether free from doubt, a fairreading of the opinion indicates a likelihood that the Court of Appeal failed to determine whether the other two claimsin the complaint were arbitrable. For this reason, the judgment of the Court of Appeal is vacated, and the case remanded for further proceedings.

Substantial Amendment To Complaint Affords New Opportunity To Demand Arbitration

In Krinsk v. SunTrust Banks, Inc., the Eleventh Circuit released a published opinion and reversed the District Court's order and held that a defendant is given a new opportunity to demand arbitration when the plaintiff files an amended complaint. The court stated that:

[SunTrust] appeals the district court’s order denying its motion to compel plaintiff Sara Krinsk to submit her claims to arbitration pursuant to an arbitration agreement governed by the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq. The district court held that SunTrust had, by participating in the litigation for nine months prior to requesting that the case be submitted to arbitration, waived its contractual right to compel arbitration. In its appeal, SunTrust argues that Krinsk’s submission of an amended complaint revived its right to compel arbitration, notwithstanding its previous waiver of that right. We find merit in SunTrust’s argument and therefore vacate the order and remand to the district court for further proceedings.

The court stated:

Although, under the Federal Rules of Civil Procedure, “an amended complaint supersedes the initial complaint and becomes the operative pleading in the case,” Lowery v. Ala. Power Co., 483 F.3d 1184, 1219 (11th Cir. 2007), the filing of an amended complaint does not automatically revive all defenses or objections that the defendant may have waived in response to the initial complaint.....However, the defendant will be allowed to plead anew in response to an amended complaint, as if it were the initial complaint, when the “amended complaint . . . changes the theory or scope of the case.” Brown v. E.F. Hutton & Co., 610 F. Supp. 76, 78 (S.D. Fla. 1985) (citing Joseph Bancroft & Sons Co. v. M. Lowenstein & Sons Co., 50 F.R.D. 415 (D. Del. 1970)). It simply would be unfair to allow the plaintiff to change the scope of the case without granting the defendant an opportunity to respond anew. Id.

Likewise, a defendant’s waiver of the right to compel arbitration is not automatically nullified by the plaintiff’s filing of an amended complaint....Rather, courts will permit the defendant to rescind his earlier waiver, and revive his right to compel arbitration, only if it is shown that the amended complaint unexpectedly changes the scope or theory of the plaintiff’s claims.

In this case, the Eleventh Circuit held that the plaintiff changed the complaint to such an extent to allow the defendant to demand arbitration. The court stated:

Here, the Amended Complaint is clearly not like the amended complaints in these latter cases. Although, as the district court concluded, the Amended Complaint does merely assert new claims based on the same operative facts as the claims in the Original Complaint, the Amended Complaint is by no means “immaterial.” That conclusion flatly ignored the significance of the new class definition in the Amended Complaint, which greatly broadened the potential scope of this litigation by opening the door to thousands—if not tens of thousands—of new class plaintiffs not contemplated in the original class definition by discarding the old definition’s limits on the class plaintiffs’ age and on the bases for their HELOC suspensions, and by expanding the class period from over three months to over three years.

This vast augmentation of the putative class so altered the shape of litigation that, despite its prior invocations of the judicial process, SunTrust should have been allowed to rescind its waiver of its right to arbitration. 

Denial Of KPMG's Motion To Compel Arbitration of Madoff Claims Affirmed

Update: On November 7, 2011, the United States Supreme Court vacated the opinion discussed below. The Supreme Court's opinion is discussed HERE. The original post remains unchanged below:

In KPMG, LLP v. Cocchi, et al (4D09-4867 & 4D10-988), the Fourth District affirmed two orders entered by the trial court.  The first denied a motion to compel arbitration and the second denied a motion to dismiss on forum non conveniens grounds.  The facts were described as follows:

The plaintiffs are nineteen individuals and entities, most of whom are Florida residents, who bought a limited  partnership interest in one of three  limited  partnerships  – referred to collectively  here as the “Rye Funds.”  The limited partnerships invested with Bernard Madoff in his infamous Ponzi scheme and lost  millions of dollars.  The limited partnerships were managed  by Tremont Group Holding, Inc., and Tremont Partners,  Inc.  The plaintiffs sued the limited partnerships and the Tremont  defendants,  together  with  its  auditing  firm  KPMG.  As  to KPMG, the plaintiffs alleged causes of action for negligent misrepresentation, violation of the  Florida Deceptive  and Unfair Trade Practices Act (“FDUTPA”),  professional malpractice, and aiding and abetting a breach of fiduciary duty. 

The court concluded:

We affirm the order denying the motion to compel arbitration, because the arbitral agreement upon which KPMG relied would not apply to the direct claims made by the individual plaintiffs. We affirm the order denying the motion to dismiss for forum non conveniens, because neither the motion nor its attached affidavit, nor the argument at hearing, was legally sufficient to overcome the  strong  presumption in favor of the resident plaintiffs’ choice of forum. 

With regard to the arbitration issue, applying Delaware law, the court stated:

In Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031, 1033 (Del. 2004), the Delaware Supreme Court established a test when analyzing whether an action by stockholders (or limited partners) was direct or derivative of the corporation/general partnership’s cause of action. The questions which must be asked are: 1) who suffered the harm, the corporation or the stockholders individually, and 2) who received the benefit of the recovery or remedy? Because the claims of negligent misrepresentation and violation of FDUTPA allege individual harm to the plaintiffs and involve torts directed at the individual limited partners, we conclude that the limited partners suffered individual harm....We therefore affirm the trial court’s denial of the motion to compel arbitration. 

With regard to the forum non conveniens issue, the court stated:

KPMG also moved to dismiss on forum non conveniens grounds, claiming that all of its activities occurred in New York where it audited the defendants. With its motion it filed a two-page affidavit of a senior manager, stating that in connection with its agreement to audit the various limited partnerships, it performed all of its work in New York. The trial court denied the motion, concluding that the affidavit was insufficient to carry KPMG’s burden of persuasion.  On appeal, KPMG argues, among other things, that the trial court applied an incorrect legal standard in ruling on the forum non conveniens issue. Even if we were to agree, we conclude that the motion and supporting affidavit were legally insufficient to warrant a change of forum.

The court then concluded:

Florida has adopted the doctrine of forum non conveniens in Kinney System, Inc. v. Continental Insurance Co., 674 So. 2d 86 (Fla. 1996), and it is now codified in Florida Rule of Civil Procedure 1.061(a)....A strong presumption favors a resident plaintiff’s choice of forum....The defendant seeking dismissal bears the burden of persuasion as to each factor....

***

In this case, the motion and the affidavit addressed only one private interest factor...Without addressing all of the factors of private interest, as well as factors of public interest, the motion, the affidavit and the hearing argument were decidedly inadequate to warrant dismissal of the action. The trial court cannot be said to have abused its discretion in determining that the motion and affidavit were insufficient to carry the burden for KPMG.

Judge Warner wrote the opinion and Judge Polen and Judge Farmer concurred.

Collateral Estoppel Precludes Trial Court From Deciding Issue Previously Decided By Arbitrators

In Bates v. The Betty & Ross Co. (3D09-2071), the Third District reversed an order terminating an arbitration. 

After the complaint was filed, the parties voluntarily entered into an arbitration agreement which required them to submit to arbitration “with respect to the allegations in the complaint.” The trial court then ordered the case to arbitration. Once the matter was in arbitration, Bates filed an Amended Claim alleging wrongful conduct on the part of Alec Ross, individually, and against the corporation for bad faith in providing incorrect payoff information for refinancing with regard to the loans. The civil theft allegations were dropped. The Betty & Ross Co. and Alec Ross moved the Arbitration Panel to terminate arbitration, arguing that Bates had breached the arbitration agreement by substituting a different set of allegations not encompassed by the original arbitration agreement that, they contend, are not subject to arbitration. The Arbitration Panel found a nexus between the new claims and those contained within the arbitration agreement and denied the motion to terminate arbitration without prejudice.  Unhappy with the Arbitration Panel’s decision, Alec Ross then moved in the Monroe County Circuit Court to terminate arbitration basically on the same grounds as previously argued before the Arbitration Panel. The trial judge granted the motion to terminate arbitration.

The Third District reversed, based upon two separate grounds.  Noting that "the scope of the agreement should be resolved in favor of arbitration, not against it," the court first concluded that:

We construe the facts stated in the Amended Claim as having been alleged “with respect to” those allegations in the original complaint. The Amended Claim therefore comes within the scope and meaning of the arbitration clause.

The court then concluded "that the parties were collaterally estopped from even bringing this issue before the trial court."  The court stated:

The parties in this case were collaterally estopped from bringing the issue of whether termination was appropriate before the circuit court by first raising the issue before the Arbitration Panel and receiving a ruling from the panel. The essential elements of collateral estoppel, that the parties and issues are identical and that the particular matter was fully litigated and determined resulting in a final decision of a court of competent jurisdiction, are present here. See Dep’t of Health & Rehab. Servs. v. B.J.M., 656 So. 2d 906, 910 (Fla. 1995). Therefore, the determination made in the arbitration proceeding by the Arbitration Panel to deny the motion to terminate arbitration bars the trial court from hearing the motion to terminate arbitration under the doctrine of collateral estoppel. Dadeland Depot, Inc., v. St. Paul Fire & Marine Ins. Co., 945 So. 2d at 1216.

Order Compelling Arbitration Over Mold Claim Against Builder Affirmed

In Rodriguez v. Builders Firstsource-Florida, LLC (4D09-1716), the Fourth District affirmed Palm Beach County Circuit Court Judge Edward A. Garrison's order compelling arbitration.  The court stated:

The appellants assert that their personal injury claims for mold exposure are based on duties of care imposed by common law—and not on the purchase agreement containing the arbitration clause—and therefore are not arbitrable.....The appellants allege that the damages were caused by the negligent design and construction of the home by GL Associates, GL Corp., and GL Florida, and the window contractor, Builders. In fourteen counts, the appellants claimed property damages as well as substantial adverse health consequences caused by th e mold infestation.

***

“Whether a particular issue is subject to arbitration is generally considered a matter of contract interpretation, and, therefore, the standard of review is de novo.” Hirshenson v. Spaccio, 800 So. 2d 670, 674 (Fla. 5th DCA 2001).

“[T]here 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). Appellants dispute the second element. “[T]he determination of whether a particular claim must be submitted to arbitration necessarily depends on the existence of some nexus between the dispute and the contract containing the arbitration clause.” Id. at 638.

***

Our decision in Engle Homes, Inc. v. Jones, 870 So. 2d 908, 909 (Fla. 4th DCA 2004) controls this issue. In Engle, the plaintiffs sued their builders for damages arising from mold infestation of their home due to alleged negligent design and construction of the home. Based on the purchase agreement, the builders moved to compel arbitration and stay litigation. An arbitration clause in the purchase agreement provided, in part, that “[a]ny and all unsettled claims or disputes regarding the construction of Residence arising after closing shall be settled by binding arbitration.” Id. at 909 (emphasis added in original).

***

The language of the Purchase Contract clearly and unambiguously requires submission to binding arbitration for the claims stated in the amended complaint. “A court is not empowered to rewrite a clear and unambiguous provision, nor should it attempt to make an otherwise valid contract more reasonable for one of the parties.” N. Am. Van Lines v. Collyer, 616 So. 2d 177, 179 (Fla. 5th DCA 1993); see also Barakat v. Broward County Hous. Auth., 771 So. 2d 1193, 1195 (Fla. 4th DCA 2000) (“It is never the role of a trial court to rewrite a contract to make it more reasonable for one of the parties or to relieve a party from what turns out to be a bad bargain.”). “The general rule is that competent parties shall have the utmost liberty of contracting and their agreements voluntarily and fairly made will be upheld and sustained by the courts. . . . The fact that one of the parties to a contract made a hard bargain will not alone avoid a contract.” Pierce v. Isaac, 184 So. 509, 513 (Fla. 1938).

Eleventh Circuit Certifies Unconscionability & Class Action Waiver Case To Florida Supreme Court

In a published opinion released today, the Eleventh Circuit certified the following questions to the Florida Supreme Court:

(1) Must Florida courts evaluate both procedural and substantive unconscionability simultaneously in a balancing or sliding scale approach, or may courts consider either procedural or substantive unconscionability independently and conclude their analysis if either one is lacking?

(2) Is the class action waiver provision in Plaintiff’s contract with Sprint procedurally unconscionable under Florida law?

(3) Is the class action waiver provision in Plaintiff’s contract with Sprint substantively unconscionable under Florida law?

(4) Is the class action waiver provision in Plaintiff’s contract with Sprint void under Florida law for any other reason?

The decision Pendergast v. Sprint Nextel Corporation (09-10612) described the action below as follows:

Plaintiff James Pendergast appeals the district court’s order granting the motion to compel arbitration filed by Defendants-Appellees Sprint Solutions, Inc. and Sprint Spectrum, L.P. (collectively, “Sprint”). Plaintiff is a former Sprint wireless customer and sued Sprint, on behalf of himself and a similarly-situated class, for allegedly charging improper roaming fees for calls placed within Sprint’s coverage areas. The district court found the arbitration clause and class action waiver contained in the Terms and Conditions of Plaintiff’s contract with Sprint were valid and enforceable and barred this class action.

With regard to the basis for certification, the court stated:

Our review of Florida law confirms the district court’s interpretation of Florida law as requiring a showing of both procedural and substantive unconscionability. Precedent from the Florida Third District Court of Appeal consistently requires a showing of both procedural and substantive unconscionability. Hialeah Auto., LLC v. Basulto, __ So.2d __, No. 3D07-855, 2009 WL 187584, at *2 (Fla. 3d Dist. Ct. App. Jan. 28, 2009) (“Our court has said that, to invalidate a contract for unconscionability ‘under Florida law, a court must find that the contract is both procedurally and substantively unconscionable.’”) (quoting Murphy v. Courtesy Ford, L.L.C., 944 So.2d 1131, 1134 (Fla. 3d Dist. Ct. App. 2006)); see also Golden v. Mobil Oil Corp., 882 F.2d 490, 493 (11th Cir. 1989) (stating in a commercial lease setting that Florida courts require a plaintiff to show both procedural and substantive unconscionability). Decisions from other Florida appellate districts also consistently require a showing of both procedural and substantive unconscionability. E.g., Bland v. Health Care & Retirement Corp. of Am., 927 So.2d 252, 256 (Fla. 2d Dist. Ct. App. 2006); Fonte v. AT&T Wireless Servs., Inc., 903 So.2d 1019, 1025 (Fla. 4th Dist. Ct. App. 2005); Powertel, Inc. v. Bexley, 743 So.2d 570, 574 (Fla. 1st Dist. Ct. App. 1999).

Nonetheless, there is some tension in Florida law regarding the analytical framework courts should use in evaluating both procedural and substantive unconscionability. Must courts evaluate both prongs simultaneously in a balancing exercise, or may courts stop the analysis after finding either procedural or substantive unconscionability to be independently lacking?

Some Florida courts appear to reject the procedural-plus-substantive unconscionability requirement as a rule of law or use a balancing or sliding scale approach. Steinhardt v. Rudolph, 422 So.2d 884, 889 (Fla. 3d Dist. Ct. App. 1982) (stating that although most courts take a “balancing approach” requiring “a certain quantum of procedural plus a certain quantum of substantive unconscionability,” the “procedural-substantive analysis is . . . only a general approach to the unconscionability question and is not a rule of law”) (quotation omitted and emphasis added); Fonte, 903 So.2d at 1025 (“‘The prevailing view is that procedural and substantive unconscionability must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability. But they need not be present in the same degree . . ..’”); Romano v. Manor Care, Inc., 861 So.2d 59, 62 (Fla. 4th Dist. Ct. App. 2003) (stating “[e]ssentially a sliding scale is invoked” and “the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa”).

Other Florida courts do not use, and some in fact never mention, a balancing or sliding scale approach and assess procedural and substantive unconscionability independently, concluding that if one part of the unconscionability test is not established, the other part need not be examined at all. Bland, 927 So.2d at 257 (“This court, however, eschews the ‘sliding scale’ approach. Rather, we assess procedural unconscionability and substantive unconscionability independently.”); Nat’l Fin. Servs., L.L.C. v. Mahan, 19 So.3d 1134, 1136-37 (Fla. 3d Dist. Ct. App. 2009) (“Because the arbitration provisions in this case suffered from no procedural malady, we do not reach the question of substantive unconscionability.”); Belcher v. Kier, 558 So.2d 1039, 1045 (Fla. 2d Dist. Ct. App. 1990) (stating “the court must view unconscionability in a two-pronged approach, i.e., procedural unconscionability and substantive unconscionability” and “because the appellees were unable to carry their burden as to both prongs, the ruling in their favor cannot stand.”); see also Hialeah, __ So.2d __, 2009 WL 187584, at *5 n.4 (“Speaking for himself, the writer of the opinion suggests that in an appropriate future case, this court should reconsider Murphy v. Courtesy Ford, L.L.C., 944 So.2d 1131 (Fla. 3d Dist. Ct. App. 2006) . . . . Although the requirement for both procedural and substantive unconscionability has been repeated in a number of arbitration cases in recent years, I respectfully suggest that holding is (a) illogical, and (b) inconsistent with this court’s decision in Steinhardt v. Rudolph, 422 So.2d 884 (Fla. 3d Dist. Ct. App. 1982).”) (Cope, J.).

Fourth District Reverses Order Denying Motion To Compel Arbitration

In Ballenisles Country Club, Inc. v. Dexter Realty (4D09-485), the Fourth District reversed the trial court's denial of a motion to compel arbitration.  The court held:

“A court must compel arbitration where an arbitration agreement and an arbitrable issue exists, and th e right to arbitrate has not been waived.”...Arbitration is a preferred method of dispute resolution, so any doubt regarding the scope of an arbitration clause should be resolved in favor of arbitration.

Arbitration clauses are construed according to basic contract interpretation principles. Seifert v. U.S. Home Corp., 750 So. 2d 633, 636 (Fla. 1999). The plain language of the agreement containing the arbitration clause is the best evidence of the parties’ intent. Royal Oak Landing Homeowner’s Ass’n v. Pelletier, 620 So. 2d 786, 788 (Fla. 4th DCA 1993). The arbitration clause must be read together with the other provisions in the contract. See J.C. Penney Co. v. Koff, 345 So. 2d 732, 735 (Fla. 4th DCA 1977) (stating that a court must review the contract “without fragmenting any segment or portion”).

***

We conclude, however, that the arbitration clauses in the Subscription Agreement fall into Aberdeen’s first category. The broad language of these clauses shows that they were meant to operate as an irrevocable substitute for litigation in court and were meant to survive the transition of control of the country club, just as certain covenants in the Subscription Agreement and Membership Purchase Agreements survived that transition.

Supreme Court Decision Regarding Arbitration Requirements Under The Railway Labor Act

Also released this week was the United States Supreme Court's decision in Union Pacific R. Co. v. Locomotive Engineers and Trainmen Gen. Comm. of Adjustment, Central Region.  SCOTUS Blog had the following blurb today:

At JURIST is a piece on the Court’s decision in Union Pacific Railroad Co. v. Brotherhood of Locomotive Engineers, which turns on arbitration requirements under the Railway Labor Act.

Order Compelling Arbitration Affirmed Even Though AAA Will Not Arbitrate Dispute - Failed To Show Agreement Was Procedurally and Substantively Unconscionable

In Estate of Perez v. Life Care Centers of America, Inc. (5D08-4287), the Fifth District affirmed the trial court's order compelling arbitration.

In this case, "The personal representative contends that the arbitration agreement entered into between Ms. Perez and Life Care is unenforceable as it is unconscionable, and because the designated arbitrator, the American Arbitration Association (“AAA”) no longer accepts the administration of health care claims involving pre-dispute arbitration agreements."

To invalidate an arbitration agreement under Florida law, a court must find that the contract is both procedurally and substantively unconscionable...To determine whether a contract is procedurally unconscionable, a court must look to the manner in which the contract was entered into and consider factors such as “whether the complaining party had a realistic opportunity to bargain regarding the terms of the contract or whether the terms were merely presented on a ‘take-it-or-leave-it’ basis; and whether he or she had a reasonable opportunity to understand the terms of the contract.” A party to a contract is not “permitted to avoid the consequences of a contract freely entered into simply because he or she elected not to read and understand its terms before executing it, or because, in retrospect, the bargain turns out to be disadvantageous.

In the present case, the personal representative makes a convincing argument that the arbitration agreement is procedurally unconscionable, given the circumstances surrounding its execution. However, no argument is made regarding the agreement’s substantive unconscionability and consequently, the unconscionability argument must fail.

***

Because the agreement between Ms. Perez and Life Care was entered into pre-dispute, AAA will not administer the arbitration. While the personal representative contends that the refusal of AAA to administer the arbitration is fatal to the arbitration agreement, that argument was recently rejected in New Port Richey Medical Investors, LLC v. Stern ex rel Petscher, 14 So. 3d 1084 (Fla. 2d DCA 2009). We fully agree with that opinion

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For these reasons, we affirm the circuit court’s order compelling arbitration.  Upon motion of either party, the trial court is authorized to appoint one or more arbitrators or an umpire as provided by section 682.04, Florida Statutes (2008).

The New Port Richey Medical Investors, LLC v. Stern ex rel Petscher, 14 So. 3d 1084 (Fla. 2d DCA 2009) decision was previously discussed on this blog here.

Ninth Circuit Affirms Holding That Class Action Waiver Is Unconscionable Under California Law

In Laster v. AT&T Mobility LLC (08-56394), the Ninth Circuit affirmed the District Court's holding that the provision in AT&T's contracts waiving the right to bring a class action unconscionable under California law and that the Federal Arbitration Act does not preempt California's unconscionability law.

Florida Supreme Court Agrees To Hear Case Re: Whether The Court Or Arbitrator Resolve Public Policy Challenges

The Florida Supreme Court entered an order this week agreeing to review the Second District's decision in Gessa v. Manor Care of Florida, Inc. (2D07-1928).  The Florida Supreme Court's order accepting the case can be found here and the Florida Supreme Court case is styled Angela I. Gessa, etc. v. Manor Care of Florida, Inc., et al. (SC09-768).   Chief Justice Quince, Justice Pariente, Justice Lewis and Justice Canady concurred.  Justice Perry concurred in accepting the case but would do so without oral argument.  The Petitioner's Jurisdictional Brief can be found here and the Respondent's Brief on Jurisdiction can be found here.  Both the Petitioner and the Respondent agreed the court should accept the case.

The Responsent's Brief on Jurisdiction states:

Consistent with these federal decisions, the Second District refused to address Gessa’s remedial limitations challenge and instead left the issue for the arbitrator. While the court did not explain why it was sending the case to arbitration without resolving Gessa’s public policy challenge, and though the court stated in a footnote it was not deciding whether the arbitrator or court should address this issue in the first instance, the result left the public policy challenge for the arbitrator to resolve, contrary to Bryant, SA-PG-Ocala, and Linton.


Given the result below, the Second District’s decision in Gessa conflicts with the decisions in Bryant, SA-PG-Ocala, and Linton. A trial court in the Second District sends a case to arbitration without addressing the enforceability of an agreement’s remedial limitations, while trial courts in the First, Fourth, and Fifth District’s resolve the enforceability issue themselves. Manor Care thus agrees the Court should accept jurisdiction to resolve the important issue of whether a public policy challenge to an arbitration agreement’s remedial limitations is for the court or the arbitrator to decide.

The Petitioner's Jurisdictional Brief states:

The Florida Constitution grants this Court discretionary jurisdiction to review a district court decision that expressly and directly conflicts with a decision of another district court. Art. V, §3(b)(3), Fla. Const. (1980). Ms. Gessa seeks further review of the decision based on the Second District’s express and direct conflict with the Fourth District’s decision in Alterra Healthcare Corporation v. Bryant, 937 So.2d 263 (Fla. 4th DCA 2006), with the First District’s opinion in Alterra v. Linton, 953 So.2d 574, 576 (Fla. 1st DCA 2007) and with the Fifth District’s decision in SA-PG-Ocala, LLC v. Stokes, 935 So.2d 1242 (Fla. 5th DCA 2006), and numerous other decisions cited throughout this brief.

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The Gessa decision is in direct and express conflict with decisions from the First, Fourth and Fifth Districts on the issue of whether a Court should decide enforceability issues of an arbitration agreement under the first prong of Seifert v. v. U.S. Home Corp., 750 So.2d 633 (Fla. 1999), or whether the arbitrator should decide that issue, where only the arbitration provisions (rather than the entire admissions agreement)is challenged as being void as violative of public policy. The Gessa decision is also in conflict with decisions from the other districts on the substantive issue of whether limitations of liability provisions which are, in fact, violative of public policy are severable, and if so, by whom? —the court, or the arbitrator. These multiple conflicts justify resolution by this Court by its exercise of discretionary conflicts jurisdiction. Further, an opinion from this Court explaining the applicability of this Court’s opinion in Cardegna v. Buckeye Check Cashing, Inc., 930 So.2d 610 (Fla. 2006) to the instant case would be instructive, where, as here, the arbitration agreement was a stand-alone document, but part of a packet of numerous forms which accompanied Ms. Gessa’s admissions agreement, and Ms. Gessa sought only to avoid the arbitration agreement, not the admissions contract.

In The Second District: "The Enforceability Of The Remedial Limitations May Be Considered By The Arbitrator"

In ManorCare Health Services, Inc., et al v. Stiehl (2D08-2351), the Second District reversed the trial court's denial of a motion to compel arbitration. Judge Altenbernd specially concurred based on controlling Second District precedent, however, agrees with the case law from other districts which reach a different result. The court stated:

The right to compel arbitration arises from an agreement of the parties. As a result, the trial court's role in deciding whether to compel arbitration is limited to three "gateway" issues: "(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). The sole consideration in this case relates to the first issue—that is, whether the arbitration agreement is valid despite remedial limitations that, Ms. Stiehl argues, defeat the public policy expressed under the Nursing Home Residents Act.

In challenging the validity of an arbitration agreement, a party must assert defenses applicable to all contracts—defenses such as fraud, duress, or unconscionability...trial court is to review those defenses which go to the validity of the arbitration agreement itself, rather than to the enforceability of the contract as a whole.

We recognize that courts have, on public policy grounds, invalidated arbitration agreements found to defeat the remedial purpose of a statute on which the suit is based...Additionally, courts in this state have specifically found arbitration agreements containing remedial limitations similar to those presented here to render an agreement to arbitrate void and unenforceable.

Nonetheless, this district has treated the validity of such remedial limitations to be beyond the initial gateway determination of an arbitration agreement's enforceability where the limitations are severable from the agreement to arbitrate...In this circumstance, the enforceability of the remedial limitations may be considered by the arbitrator "in the context of a fully developed factual record."...If the arbitrator determines the remedial limitations to be unenforceable, the limitations may be severed from the remainder of the agreement.

Review of Arbitration Awards and Prejudgment Interest

In The Keyes Company v. Spencer (4D07-3837), the Fourth District discussed the review of arbitration awards.

With respect to the award of attorney’s fees to Spencer, Spencer waived her right to have the court modify the arbitration award and award fees. She had three opportunities to seek modification or clarification of the award...She filed a timely motion to correct the award in which she asked the arbitrator to award her prevailing party fees and costs. § 682.10, Fla. Stat. (2007). The arbitrator denied that motion on the ground that he had properly decided those issues. The trial court then confirmed the award, and Spencer did not file motions to vacate or modify the award within ninety days of its entry, as required by sections 682.13(2) and 682.14(1), Florida Statutes (2007). As a result, the trial court erred in later granting Spencer fees against appellant Keyes. We reverse that portion of the award.

As this court has explained, “[r]eview of arbitration proceedings is extremely limited. A high degree of conclusiveness attaches to an arbitration award because the parties themselves have chosen to go this route in order to avoid the expense and delay of litigation.” Davenport v. Dimitrijevic, 857 So. 2d 957, 961 (Fla. 4th DCA 2003) (citations omitted).

***

On cross-appeal, we also reverse the denial of prejudgment interest to Spencer.

Spencer argues that she is entitled to interest on the amount of the deposit that she recovered in the arbitration award from the date of the arbitration award, which was September 5, 2006. We agree. The law governing this issue was set out in Okun v. Litwin Securities, Inc., 652 So. 2d 387, 388-89 (Fla. 3d DCA 1995), as follows:

Prejudgment interest must be awarded, where the claim is liquidated, from the date when payment of the claim is due. Metropolitan Dade County v. Bouterse, Perez, & Fabregas Architects, Inc., 463 So. 2d 526 (Fla. 3d DCA 1985). An arbitration award is akin to a verdict, see U.S.A.A. v. Smith, 527 So. 2d 281 (Fla. 1st DCA 1988), and once an arbitration award is confirmed by the court it becomes, like a verdict, the judgment of that court and interest on that judgment runs from date of its entry until satisfaction of same. The trial court may not award interest which predates an arbitration award. . . . The arbitration award liquidated the amount owed the Okuns and Braunstein from the date of its entry until that award was reduced to judgment, thus prejudgment interest was not only proper but was required.

Accordingly, we hold the trial court erred in its order denying Spencer prejudgment interest as well as in its award of attorney’s fees to Spencer. We reverse as to those issues and affirm as to all other issues raised.

Eleventh Circuit Affirms Modification of Judgment After the Confirmation of An Arbitration Award

In AIG Baker Sterling Heights, LLC v. American Multi-Cinema, Inc. (08-14600), the Eleventh Circuit affirmed the district court's order and rejected the claim that "the district court violated the mandate in Baker I and went beyond the exclusive grounds for modifying an arbitration award under the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1–16." [Baker I is AIG Baker Sterling Heights, LLC v. Am. Multi-Cinema, Inc., 508 F.3d 995 (11th Cir. 2007)] .

The dispute in both Baker I and this decision related to a claim that a portion of the arbitration award had been satisfied prior to the entry of the award. On remand from Baker I, the district court confirmed the arbitration award but amended the judgment to indicate a portion had been satisfied.

The law of the case doctrine and the mandate rule ban courts from revisiting matters decided expressly or by necessary implication in an earlier appeal of the same case...But neither principle applies “when the issue in question was outside the scope of the prior appeal.”...In Baker I, we spoke in pertinent part about the power of courts to correct an “evident material mistake” in an arbitration award.

***

On remand, the district court entered a judgment entirely confirming the award. Then the district court granted American relief from the district court’s judgment (not the award) to reflect the earlier payment to the taxing authority. Baker argues that this latter decision violated the law of the case and the mandate from the earlier appeal. But as we have pointed out, we discussed in Baker I only modification of the award; we decided nothing expressly or by necessary implication about the district court’s power to grant American relief from a district court judgment or to consider evidence of the payment to the taxing authority. Baker I, therefore, has no decisive role to play here. The district court did not violate the law of the case doctrine or the mandate rule on remand.

***

The FAA severely limits judicial vacatur and modification of an arbitration award. As the Supreme Court recently confirmed, sections 10 and 11 of the FAA offer the exclusive grounds for expedited vacatur or modification of an award under the statute...We do not see, though, how those FAA sections control in the circumstances of this appeal: the district court neither vacated nor modified the arbitration award. Instead, the district court entered a judgment confirming the award and about two months after that granted American some relief from the judgment under Rule 60(b)(5). 3 Sections 10 and 11 say nothing about court judgments and do not control this appeal.

We instead turn our attention to section 13 of the FAA. That provision says that a judgment confirming an arbitration award, once entered, has the same force and effect as a judgment in a standard civil action and is subject to all the provisions of law relating to those judgments...Under Rule 60(b), a court may relieve a party from a judgment if “the judgment has been satisfied, released, or discharged . . . .” Fed. R. Civ. P. 60(b)(5). This authority encompasses the power to declare a judgment satisfied “when damages are paid before trial or a tortfeasor or obligor has paid the judgment debt.”

Arbitration Properly Denied When No Written Agreement to Arbitrate

In Toll Jupiter, Limited Partnership, et al v. Motto (4D09-03), the Fourth District held:

In order to prevail on a motion to compel arbitration, the trial court must determine “(1) whether a valid written agreement to arbitrate exists; (2) whether an arbitrable issue exists; and (3) whether the right to arbitration was waived.” See Seifert v. U.S. Home Corp., 750 So. 2d 633, 636 (Fla. 1999).

We conclude, based on the facts in this case, there was never a valid written agreement to satisfy the first element of the Seifert requirement. Accordingly, we affirm the trial court’s order denying appellants’ motion to compel arbitration.