The Florida Bar Journal has been on top of arbitration issues in the last several years. The May 2009 Journal includes a detailed article following the U.S. Supreme Court's Hall Street Associates LLC v. Mattel decision from last year.

As quick background, Mattel holds that parties to an arbitration agreement cannot contract the basis for federal court review of the arbitration award -- parties are limited to the grounds set forth in the FAA, section 10. We briefly discussed this case, pre-SCOTUS, here. The opinion is here.

South Florida lawyers, Jon Polenberg and Quinn Smith, wrote their article, "Can Parties Play Games With Arbitration Awards? How Mattel May Put an End to Prolonged Gamesmanship" which ran in this month's Journal.

Their conclusion is solid. Mattel seems to have confirmed that court's jurisdiction under FAA section 10 is limited to those exclusive grounds for vacating an award, despite some potential flexibility through the use of the word "may."

But was it really "gamesmanship" at play when parties in a dispute either unilaterally sought to broaden a court's ability to review an award? More strikingly, what about when the parties agreed, pre-dispute, to contractually broaden court review? Was that playing games?

There had been a cluster of cases pre-Mattel expanding review. Few were from (or related to) Florida. Since Mattel, the Florida courts have not published a single Mattel-based arbitration opinion. We're left with good information from the article... but where was the gamesmanship?

A Palm Beach trial court, following the language of a specific arbitration agreement and a prior Idaho Supreme Court opinion, held that the parties were not required to arbitrate in the AAA despite the fact that the agreement said, "matter shall be settled by arbitration under the United States Federal Arbitration Act in accordance with the Commercial Arbitration Rules of the American Arbitration Association."

Previously, we stretched wayyyyy outside of Florida to report an Idaho Supreme Court decision, Deeds v. Blue Shield of Idaho, where it held, "This Court sees no reason why the arbitration cannot proceed 'in accordance with the applicable rules of the AAA' using a different arbitrator."

In Thomas F. Kloberg Defined Benefit Plan v. Ark Financial Services, Inc., the parties were already arbitrating a related matter before FINRA (formerly NASD). While Ark's subsidiary, Dawson James, was a FINRA member, Ark itself was not. Despite the matters sharing the same parties, lawyers, witnesses, and documents, Ark fought to keep its claim out of FINRA, despite arguing to trial judge Diana Lewis that its case should be in arbitration -- but in another forum.

The hearing transcript is here.

An unusual set of facts and a potential appellate issue leads to a ruling in Joseph Baratta v. Bradford Electric, Inc. and Elcon Electrical Contractors Corp. which may crowd, rather than clarify, the morass of case law surrounding Proposals for Settlement. It's kind of thoughtful however in the broader scheme of enforcing settlement agreements.

In this personal injury case, the defendant serves a Proposal for Settlement. The requisite thirty days pass. Around the 40th day, plaintiff's counsel asks for an extension, which is given. The plaintiff then "accepts" the deal but add additional terms. Defendant declined the added terms. The plaintiff then "accepts" the Proposal as is, without the proposed added terms -- outside of even the extended period. Defendant agrees and sends the release and check. Plaintiff signs. A few days later, after second thoughts, he sends the check back, marked "void."

Defendant moves to compel settlement. The trial court and Panel (Hazouri, Warner, and Shahood) agree that settlement should be compelled.

Strip away the concept of "Proposal for Settlement" for a moment in this fact pattern and look at this as simply a series of offers, rejections, and acceptance. It's a mess but the bottom line is that the plaintiff "accepted" the deal, signed the release, received the check and THEN tried to back out. On that basis, settlement was compelled.

Now turn back on the rules regarding Proposals. Florida Rule of Civil Procedure 1.442(f)(1) says that a proposal "shall" be accepted within 30 days or else it is deemed rejected. Now, periods get extended all the time but recall that the Florida courts have repeatedly been strict (too strict?) in interpreting Rule 1.442 and Florida Statute 768.79. Does the precedent allow an informal extension of the 30 day period? Why suddenly so lenient on interpreting "shall" in this context? The Panel claims that "the statute and the rule implementing the statute apply only when there has been a rejection of a proposal for settlement..."

We also note that the Proposal for Settlement in this case reportedly had a release and hold harmless agreement attached. As previously discussed, that's an unpopular practice if the Proposal gets reviewed by an appellate court for enforceability if it was not accepted. Case law suggests attaching releases is a unwise practice. If the Proposal was NOT accepted and the plaintiff didn't beat it at trial, he could have attacked the Proposal because of the attachment. Here, however, the tables are turned since it was accepted.

In short, a deal-is-a-deal, since the court was stripping away the "Proposal" title and just looking at whether there was offer/acceptance of a settlement agreement.

We often knock the Fourth District, in a good natured way, for their track record of ruling against nursing homes in arbitration enforcement appeals. They did it again, but with good reason, at least from what we can see from the 2-page opinion.

In Adrienne Curcio as Personal Representative of the Estate of Angelina Lanzetta v. Sovereign Health Care of Boynton Beach LLC d/b/a Boynton Beach Nursing and Rehab Center, the Fourth DCA (Taylor, Stevenson and May) was faced with a trial court's order dismissing a suit and ordering the parties to arbitration after a non-evidentiary hearing on the nursing home defendant's motion to compel arbitration and to dismiss.

Below, the plaintiff had argued to the trial court that they were disputing the validity of the agreement to arbitrate premised upon the deceased nursing home resident's ability to comprehend the agreement and/or the fact that the arbitration agreement was mandatory for admission to the facility. This, in short, was an unconscionability challenge.

Under Florida Statute 682.03(1), a trial court need not hold an evidentiary hearing if the court is satisfied that no substantial issue exists as to the making of the agreement.

Here, the trial court reportedly dismissed the case but retained jurisdiction pending something arising in the course of arbitration discovery which would bolster the plaintiff's arbitration enforcement defense.

The Panel held that the non-evidentiary hearing was not sufficient and that pleading a defense of unconscionability in the face of a motion to compel arbitration warranted an evidentiary hearing. Thus, the trial court's order was reversed.

Next, the Panel held that, upon granting a motion to compel arbitration, the trial court should stay the case, not dismiss it. Presumably, and we would agree, this would simplify the process if/when the parties sought to file a motion to confirm, vacate or modify the arbitration award.

The Second District handed down a heady opinion on appealable orders, compulsory vs. permissive counterclaims, and how courts should view litigation actions over an arbitration award. The opinion turned in favor of the credit card company/defendant/claimant in arbitration based upon a finding that the appeal was premature. Although there is a dissent, we did not readily see a conflict among the intermediate courts for an immediate state supreme court appeal -- but the Panel did point out that the plaintiff-debtor still could appeal at the end of the case.

In the case of A.W. Cunningham, A/K/A Wayne Cunningham v. MBNA American N.A., a credit card holder was taken to arbitration over commercial debt before the National Arbitration Forum and declined to participate since he claimed that a third party, presumably an ex-wife, obtained a card in his name, rang up a bill, and never told him. MBNA then proceeded to file suit seeking to domesticate the arbitration award in Florida and confirm it. The debtor, now counter-claimant, sued for violations of Fair Debt Collection Practices Act (FDCPA, 15 USC 1692) and Florida Consumer Collection Practices Act (FCCPA, Chapter 559, Florida Statutes).

The Second DCA Panel (LaRose, Northcutt with Silberman dissenting) noted that this arbitration award was governed by the Federal Arbitration Act, not the Florida Arbitration Code, although we question whether there would be a difference. The trial court felt the counterclaim was a veiled attempt at a motion to vacate and therefore dismissed the counterclaim. Interestingly, the trial court also found that the debtor had not timely sought to vacate under the Florida Arbitration Code (an error which the Panel politely pointed out in a telling but non-judgmental footnote). The trial court had not confirmed the arbitration award before an appeal was taken.

The Panel considered the standards for compulsory vs. permissive counterclaims under Florida Rule of Civil Procedure 1.170 as well as the logical relationship test under a 1992 Florida Supreme Court decision and concluded, "simply stated, a compulsory counterclaim arises out of the same transaction or occurrence as the plaintiff's claim." The statutory debt collection claims attacked the alleged mis-use of arbitration and were deemed compulsory -- but a mere dismissal was not appealable. As to the negligence and defamation claims, these were deemed permissive since those claims arise out of events not necessarily related to the alleged arbitration efforts. The court held the plaintiff/debtor should have been able to amend.

The dissent offered that the negligence/defamation claims should not have been deemed permissive.

Bottom line? Well, for the parties, there is more litigation (and appeals?) ahead. Practitioners and courts should be wary of mixing and matching your arbitration rules between federal and state. Likewise, keep an eye on the rights to litigation after arbitration; the confusion over confirming, vacating, modifying, and flat our litigating (or re-litigating) arbitration awards has yet to truly become crystalized precedent.

The Third District (Ramirez, Rothenberg, and Schwartz) previously handed down a December 2008 decision in Lifemark Hospitals of Florida, Inc. d/b/a Palmetto Hospital v. Mercedes Alfonso as PR of Estate of Alexis Alfonso. In late March 2009, the court issued a clarified opinion. As we are overjoyed at the prospect of using "flesh eating bacteria" again in the title of a post, we're covering the decision.

The March 2009 decision is here. Our prior post sums up the situation quite well and the court did not appear to alter its opinion:

1. Florida Statute 766.207(7) is ambiguous.
2. The language in 766.207(7) and 766.202(3) provide for recovery of economic damages in a death case only to the extent allowed under the Wrongful Death Act.
3. Economic damages in arbitration under Chapter 766 can be limited to the Wrongful Death Act without violating Florida Constitution, Article I, Section 21 (access to courts).

It is fairly common for parties to exchange a signed contract which references terms and conditions on a website or other document. Often the website or other document will contain an arbitration clause and venue term. The case of General Impact Glass & Windows, Corp. v. Rollac Shutter of Texas, Inc. is an example of how using a combination of documents/web pages to form a contract does not work.

The parties reportedly did business primarily over the phone and through faxed order forms. Neither the discussions nor the invoices included references to other documents or arbitration. At all times, however, the defendant had a website and a printed catalog which set forth "terms and conditions" for purchases as well as order forms. There was no indication that the plaintiff ever went on the website and there was a dispute whether they received a catalog. None of the order forms exchanged came from the catalog. In short, the plaintiff denied ever knowing about the terms and conditions.

The Third District (Rothenberg, Wells, Langoa) held that there was no valid agreement to arbitrate since the documents exchanged between the parties made no reference to arbitration, the "terms and conditions" were never signed nor expressly incorporated into the deal, and the terms and conditions were simply an un-incorporated separate collateral document. Hence, no arbitration.

Take away lesson? If terms and conditions are to be in a separate document or web page, the signed contract should make clear reference to those terms and incorporate them into the agreement.

In a 5-4 opinion, the United States Supreme Court issued a decision that union members can be required to arbitrate ADA, Title VII, and ADEA discrimination cases based upon an arbitration clause negotiated in the collective bargaining agreement by the union on behalf of the employee. While this case may ultimately be more of an employment case than an arbitration case, the Court's position on arbitration is important.

In 14 Penn Plaza LLC v. Steven Pyett, a collective bargaining agreement clearly stated that employees must arbitrate claims. Based upon a 1974 case, the employee claimed that federal statutory claims for discrimination under Title VII and ADEA can't be arbitrated. The Court held that the 1974 opinion was not that broad, as evidenced by a 1991 case. The emerging "Gilmer test" appears to be that statutory claims can be arbitrated unless Congress has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue." The anti-arbitration sentiment from Congress needs to be explicitly stated.

In short, when a federal statute discusses that a claimant has remedies in a court of competent jurisdiction, this opinion suggests that such wording does not preclude arbitration.

Notably, these older 1974/1991 cases had some anti-arbitration dicta which the Court "has since abandoned" due to a "misconceived view of arbitration." Previously, the Court had erred in stating that submitting statutory claims to arbitration was a waiver of those rights but "it confused an agreement to arbitrate those statutory rights with a prospective waiver of those statutory rights."

The Court also changed its mind on the notion that discovery in arbitration was not adequate for these kinds of cases. Now, the court confirms that "arbitral tribunals are readily capable... [and] there is no reason to assume at the outset that arbitrators will not follow the law." As to discovery, while "arbitration procedures are more streamlined than federal litigation, [that] is not a basis for finding the forum somehow inadequate..." In short, objections about arbitration in general "do not have a credible basis."

Dissents argued that this opinion broke from precedent, although none of the dissenting justices receded from the pro-arbitration stance to any significant degree.

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