Posted on November 9, 2023, by Lauren Kerr
by Lauren Kerr, attorney of counsel, MLG
Many construction agreements require resolution of disputes by arbitration. This means that the parties intend to waive a jury trial and instead have any claims adjudicated by a neutral third party, the arbitrator(s). But, how far the parties’ agreement to arbitrate extends, and to which claims, are often hotly contested when a dispute arises. Because the scope of an arbitration provision can be narrow or far-reaching, it is important to draft these contractual agreements carefully. Several recent Florida cases illustrate this point.
To compel a party to arbitration in lieu of court, there must be a valid agreement to arbitrate, and there must be an “arbitrable issue.”
Parties are bound by the plain language of their agreements
In deciding whether a valid agreement to arbitrate exists, the courts apply basic contract interpretation principles. The plain language of the agreement controls, and sometimes the arbitration clause must be read together with other portions of the agreement. In December 2022, the Third District Court of Appeal reiterated these principles in Erb v. Chubb National Insurance Company, 366 So.3d 1126. The plain language of the insurance agreement required the insurer to file a petition for arbitration within one year from the date of loss. Because the insurer failed to do so, the court held that the insurer was bound by the clear and unambiguous provisions of the contract and therefore waived its right to arbitration. The insurer could have drafted its insurance contract to avoid this result.
Once the court decides there is a valid agreement to arbitrate, it must next determine whether there is an “arbitrable issue.” This means that the pending dispute must fall within the scope of the agreement to arbitrate. In January of this year, the Fourth District Court of Appeal demonstrated the importance of inclusion (or exclusion) of certain claims from the arbitration agreement in Lennar Homes, LLC v. Wilkinsky. Wilkinsky purchased a home from Lennar Homes, LLC in a community. The purchase and sale agreement contained a valid agreement requiring Wilkinsky to arbitrate certain claims with Lennar. These claims included “all controversies, disputes, or claims (1) arising under, or related to, this Agreement, the Property, the Community, or any dealings between Buyer and Seller…”. Wilkinsky alleged he sustained injuries while bicycling in the community and sued Lennar in circuit court for personal injury damages. The appellate court required Wilkinsky to arbitrate his claims with Lennar because the arbitration agreement specifically included disputes related to “the Community.”
Contrast Wilkinsky with the Third District Court of Appeal’s July 2022 decision in Navarro v. Varela. In this matter, Varela was an employee of Navarro. After Varela became pregnant, Navarro terminated her employment. Varela sued Navarro for breach of her employment contract and several other claims, including intentional infliction of emotional distress and violations of the Florida Civil Rights Act. The court, citing the Florida Supreme Court, noted that in determining whether a claim is subject to arbitration requires the existence of a nexus between the dispute and the contract containing the arbitration clause. Although the court found that the arbitration provision of Varela’s employment contract required arbitration of her breach of contract and other claims, the court held that Varela could not be required to arbitrate her intentional infliction of emotional distress and Florida Civil Rights Act claims. In doing so, the court reasoned that these claims were not related to her employment contract because Varela did not allege that Navarro’s conduct violated the employment contract, and her claims were not based on the terms of the employment contract. Rather, the Florida Civil Rights Act imposes certain duties on an employer regardless of the employment contract, and the claim for intentional infliction of emotional distress is a tort that extends duties to all persons who would be injured by Navarro’s conduct. These claims did not require reference to or construction of the employment contract and, therefore cannot be compelled to arbitration. If Navarro and Varela intended for claims like these to be subject to arbitration, they could have stated this specifically in the employment contract.
This is not an entirely new concept in Florida. In Hart v. Zemmour, the court held that Zemmour could not be required to arbitrate claims outside the scope of the contract. Zemmour was a foreign investor planning to immigrate to the United States through an investment visa. Zemmour hired Hart as their immigration attorney. Hart prepared an investment agreement in a pizza business and, ultimately, the business was found to be worthless. Zemmour sued Hart for malpractice-related claims. Hart moved to compel arbitration based on a clause in the investment agreement, but the court held that Zemmour’s malpractice claims were not related to or captured by the investment agreement.
The common thread between the recent Florida decisions and those from the past is this: parties will be bound to the plain language of their arbitration agreements. Thus, parties must carefully draft arbitration agreements so that they fully capture the intent of the parties.
If you need assistance drafting a construction law arbitration agreement, enforcing a construction law arbitration agreement, or defending your business in a construction law arbitration, contact Massey Law Group, P.A. Our team has handled hundreds of arbitration matters and is prepared to assist you.
Lauren Kerr specializes in construction law, including litigation and arbitration of contested matters. Lauren is board-certified by the Florida Bar in construction law, a distinction awarded to only a small percentage of attorneys in Florida after careful study, examination, and peer review.
The above is intended to inform firm clients and friends about recent developments in the law, including analysis of statutes and new case decisions. This update should not be construed as legal advice or a legal opinion, and readers should not act upon the information contained herein without seeking the advice of legal counsel.
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