Who Decides the Issue: Court or Arbitrator(s)?
As an initial consideration, it is important to recognize that Florida courts have repeatedly held that “courts are required to indulge every reasonable presumption in favor of arbitration, recognizing it as a favored means of dispute resolution.” Am. Int’l Grp., Inc. v. Cornerstone Buss, Inc., 872 So. 2d 333, 338 (Fla. 2d DCA 2004) (citing Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983)); Perdido Key Island Resort Dev., L.L.P. v. Regions Bank, 102 So. 3d 1, 3 (Fla. 1st DCA 2012) (“Florida law favors arbitration, often holding that any doubt regarding the arbitrability of a claim should be resolved in favor of arbitration.”).
When determining who decides the issue, the first place of consideration should be the language of the contract. Substantive issues such as whether the parties are bound to an arbitration clause will be left to the court. When a court is determining whether to compel arbitration three factors must be considered: 1) whether a valid agreement to arbitrate exists; 2) whether an arbitrable issue exists and; 3) whether the right to arbitration was waived. O’Keefe Architects, Inc. v. CED Construction Partners, Ltd.,944 So. 2d 181 (Fla. 2006); see also Seifert v. U.S. Home Corp., 750 So. 2d 633, 636 (Fla. 1999). Alternatively, procedural issues will be left to the arbitrators to decide. Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002). For example, it is up to the arbitrator to decide if the state of limitations has passed to bring a claim to arbitration. Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002), see also O’Keefe Architects, Inc. v. CED Construction Partners, Ltd.,944 So. 2d 181 (Fla. 2006).
When allegations as to the validity of the contract as a whole, as opposed to the arbitration clause in particular arise, the decision is left to the arbitrator. Prima Paint Corp. v. Flood & Conklin Mfg. Co., 87 S.Ct 1801 (1967), see also Buckeye Check Cashing, Inc. v. Cardegna, 126 S.Ct. 1204 (2006). Furthermore, if the contract is silent as to an issue and not specifically forbidden by the contract, the arbitration is valid and the arbitrator is tasked with interpretation of the issue. Green Tree Fin. Corp. v. Bazzle, 123 S.Ct. 2042 (2003). However, when the formation of a contract generally is called into question (not the invalidation as in Prima Paint/Buckeye) then the court will decide the issue unless a clause in the agreement delegates the case to arbitration. Granite Rock Co. v. International Brotherhood of Teamsters, 86 So. 3d 484 (Fla. 2011).
Importantly, despite the aforementioned guidelines, there are some caveats to consider when determining who is the proper authority to decide the issue. First, it is important to note that delegation clauses will be enforced as written. In Terminix v. Palmer Ranch Limited Partnership, 432 F.3d 1327 (11th Cir. 2005), the parties agreed to have the arbitrator decide which provisions in the contract are valid and as such the court held that arbitrator should decide whether the arbitration clause is valid based on the incorporation of the AAA rules.
Secondly, in a landmark decision, SCOTUS addressed the issue of who must determine whether an arbitration agreement is unconscionable. Rent-A-Center v. Jackson, 561 U.S. 63 (2010) The Court held that when a delegation provision is called into question, the provision itself needs to be challenged or else the decision will be left to the arbitrator, and not the court. Id. (“if a party challenges specifically the enforceability of that particular agreement, the district court considers the challenge, but if a party challenges the enforceability of the agreement as a whole, the challenge is for the arbitrator”). Nevertheless, the Rent-A-Center rule has been carved out and limited by various courts. For example, in Shotts v. OP Winter Havenand Gessa v. Manor Care of Florida, Inc., 86 So. 3d 456 (Fla. 2011), the Florida Supreme Court limited the application of Rent-A-Centerto arbitration agreements containing delegation provisions, versus a blanket rule that applied to all agreements. Therefore, the Shottscourt determined that the court, not the arbitrator, had the authority to determine if an arbitration provision was void due to public policy.
The application of the law to arbitration agreements is very fact intensive. It is critical to read each provision and have an awareness of the finite requirements that have been articulated by the courts. Who decides the issue will ultimately be determined based on the specific provisions and language of the arbitration agreement at issue.
For more information on this topic, please contact Victoria Pearce at vpearce@bbdglaw.com.
