Mediators, judges, and homeowners facing foreclosure are collectively cheering yesterday's order from the Florida Supreme Court ordering mediation for all foreclosure cases. Already required for all litigation cases, the new ADR requirement for foreclosure matters is aimed at stemming the nearly a half million foreclosures which were filed last year.

Caveats/details:
1. Homeowner pays none of the mediation costs upfront but can be charged with the costs in the Final Judgment;
2. Only Florida Supreme Court certified mediators will be referred cases;
3. The mediator requirement only applies to cases filed AFTER the order (but I can foresee judges agreeing to a Motion to Compel/Request Mediation in pending matters);
4. Mediation fees are capped at $750;
5. New requirement that lender must prove they hold the note.

I'm told that foreclosure defense often involves slowing the process so that the homeowner can develop alternatives. Without question, adding requirements where the lender has to come up with the paperwork to prove the note and scheduling mediation where someone with authority from the bank must attend would, indeed, assist in that purpose.

Commentary from the South Florida Business Journal is here.

The Florida Supreme Court order is here.

We previously reported on a federal bill which prevented overseas military contractors from inserting arbitration clauses which would require employees to arbitrate Title VII and other specified claims. While a narrow issue, the bill was raised after heavy scrutiny arose from several cases which drew significant (negative) attention. President Obama signed it into law this month.

The larger question is whether this was a small step towards more significant anti-arbitration legislation.

Thanks to the Legal Times blog, for catching the story, "Obama Signs into Law Restriction on Arbitration Clauses."

Some interesting video clips from Senator Al Franken's speech are here.

Information on the bill, and our own coverage of related issues, is here.

Of late, the Second District has brought out its heavy arbitration paddle and taken it to attorneys and trial judges. The paddle came out again in Johnson Pope Bokor Ruppel & Burns, LLP v. John Forier; Paradise Lakes Resort, LLC; Cabana at Paradise, LLC et al. although this time the treatment was reserved for the trial judge who confused compelling arbitration with summary judgment.

It appears that the defendant filed a motion to compel which was set (by someone) as an 8:45 a.m. five minute hearing (in many districts, if not all, courts are prohibited from taking evidence at an 8:45). There was a dispute regarding the circumstances surrounding the execution of the document.

The trial court denied the motion on the grounds that it could not grant the motion because, like summary judgment, such motions could not be granted if there is a dispute over material facts.

Actually, no, if there is a dispute over material facts, then there needs to be an expedited hearing.

Arguably, this case has some value since it suggests that if the "first" hearing on the motion to compel arbitration is not an evidentiary one, there can be a "second" hearing.

Several years ago, some plaintiff lawyers developed an argument to avoid arbitration where they would agree that the defendant corporation was subject to arbitration but the plaintiff would then sue individual employees of the defendant corporation and claim those individuals were not signatories. This would create pressure on the defendant since its current/former employees would be sued in a separate case.

Along came the case of Alterra v. Linton (Graham) in 2007, which effectively ended the dispute with the common-sense analysis that the defendant corporation was nothing without its employee human beings and they, by implication, were within the scope of the arbitration agreement.

A Hillsborough County trial judge was recently confronted with a different twist on this dispute and was asked whether a resident's treating doctor and nurse practitioner could avail themselves of the resident-nursing home arbitration agreement. The trial court answered "no," reasoning that the doctor/ARNP were not employees nor agents of the defendant and were either (a) health care providers for the resident PRIOR to admission or (b) they were health care providers DURING the admission but not in a situation where the nursing home was reasonable for their actions in a respondeat superior situation. Moreover, the court disagreed that the doctor/nurse were intended third party beneficiaries.

Here is Judge Neil A. Roddenbery's trial order: Mary Laurine Umstead by and through Carol Donaldson v. Horizon Bay Management, LLC d/b/a Merrill Gardens at Lutz; Allison Foster, ARNP; and Pritesh & Tarak, P.A. d/b/a Sunmed Primary Care.

We've discussed recently the cases of Life Receiveables v. Goshawk and Jaylene v. Steuer, both of which we interpret to address questions as to whether (or what) the arbitrators can decide relative to arbitrability and/or their own jurisdiction.

The U.S. Supreme Court is facing a similar issue in Stolt-Nielsen v. AnimalFeeds International, which was briefed and went to oral argument last week.

The question presented is:

Whether imposing class arbitration on parties whose arbitration clauses are silent on that issue is consistent with the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq.

At oral argument, Justice Stevens commented:

"The question was whether that silence should be interpreted as a preclusion or a permission."

Stated differently, we like how Cornell's Legal Information Institute (LII) framed it:

Is reading a contract to allow class arbitration, when the contract does not expressly allow it, consistent with the FAA?

The dispute is amazing simple yet suffering from an equally remarkable number of legal tentacles and policy issues. We'll see if SCOTUS takes it head on or dodges the issue, as was done in Green Tree v. Bazzle. In Bazzle, the court was set to take on the question but ultimately diverted focus to rule that the arbitrator, in the first instance, had to decide whether the agreement was silent or not on the class issue. Since then, there's been hot debate on class actions in arbitration.

Back to Stolt-Nielsen, the dispute arose over whether large international shipping companies were violating anti-trust laws by price fixing. There was an arbitration clause in the contracts however it did not mention class action standing. While the plaintiff filed suit as a class action claim, it was referred to arbitration. The matter was ultimately presented to the AAA, which has rules giving the arbitrator the authority to decide its own jurisdiction.

LII provides a fine case analysis, much longer than we can provide here. In a nutshell, the defendant does not want class action and they, along with their amici, argue that (1) federal law says arbitration agreements are to be enforced "according to their terms" and there is no class action term here, (2) aggregating multiple claims into one arbitration creates an enormous, potentially bankrupting risk (which they further suggest is a weapon by class action lawyers), (3) class action is a uniquely American phenomenon and will impact international trade, and (4) there is a fear of inconsistent rulings.

The plaintiff, here advocating for arbitration for the class, avers that (1) the parties delegated power to the arbitrators and (2) barring class action will burden small claimants.

The challenge to vacate the award was based upon the "exceeded their powers" theory.

At oral argument, there were heady discussions of arbitration theories as well as practical questions as to whether the arbitrators may have made the wrong decision on class certification. Justice Scalia questioned that if a contract doesn't prohibit something whether it then permits it. Justice Ginsberg noted that the plaintiff originally intended a class action claim and, by limiting it in arbitration, there may be a problem. Our friends at Courthouse News Service provide greater detail on oral argument, here.

Comments:
1. Class certification creates some nettlesome issues. Don't rule out that the court issues a narrow decision limited to class action issues.
2. Maritime law can depart from common law. We agree with most commentators that maritime vs. land law should not be a defining issue, but parties hard pressed may later raise that distinction.
3. Note the irony that the defendant is seeking to avoid arbitration while the plaintiff is pressing for it. Has class action become the plaintiff bar's weapon against big business' ubiquitous arbitration clause? If the fear is that arbitrators-give-something-but-never-enough, its not a bad forum for class action lawyers where legal fees often reign supreme -- coupled with the fast movement often found in arbitration.
4. If the provision is silent but the parties agreed to rely on the AAA rules, they may be bound by AAA's rule which allows the arbitrators to determine their own jurisdiction. This would be consistent with the you-made-your-bed, you-lie-in-it approach that courts often take when parties are unhappy with an arbitrator's award.
5. Those who follow the concept and practice of arbitration -- if not the "industry" of arbitration itself -- may want to watch and see if the U.S. Supreme Court slaps down AAA's rule allowing arbitrators to define their own jurisdiction.

Thanks to LawMemo who tipped us off. Also special recommendation to SCOTUSWiki for their helpful materials. LII, cited above, has our continued respect and admiration.

Earlier this month in Jaylene v. Steuer, Judge Northcutt examined the Second District's method of leaving questions of arbitrability to the arbitration panel. Since we believe this is an issue which will be explored and expanded, we turn our gaze north to see how other states have addressed such issues.

At first glance, Life Receiveables Trust v. Goshawk Syndicate 102 at Lloyd's seems like a post-Hall Street v. Mattel dispute over whether parties can contractually expand the court's grounds to review an arbitration award (no, they cannot).

But the meat of the issue is who decides arbitrability. In Life Receiveables, it is the concurring opinion which pins down that the case is really about whether a court or arbitrator should decide if the arbitration agreement is invalid/unenforceable.

Much like Florida, New York law apparently applies ordinary state contract law principles to arbitration clauses. The new case notes that the 1985 U.S. Supreme Court case of First Options of Chicago v. Kaplan suggests that such issues are for the trial court. In that case, the High Court determined that silence/assent over "who" decides arbitrability should be treated differently (less defferentially) than "whether" a dispute is arbitrable.

In Kaplan, the Court suggested that (1) at the time an agreement is hammered out, parties are not inclined to focus on an arcane issue of arbitrators deciding the scope of their own power and (2) given that arbitration can only be ordered for claims which the party agreed to arbitrate, using silence/assent as the basis of agreement might too often force an unwilling party to arbitrate.

Back in the contemporary case at bar, there was unmistakable evidence that the sophisticated parties repeatedly agreed to arbitrate. The concurring judge went on to agree that the parties knowingly included the provision at issue.

Citing two federal cases in New York and California, the court questioned whether, even the in face of the parties agreeing that the arbitrator decided arbitrability, challenges of fraudulent conduct and unconscionability should still be decided by the arbitrator.

Without question, there will be more disputes over arbitrability in the near future...

Two Florida courts have previously held that if the arbitration forum is "unavailable" for some reason, the parties are directed to either work out an alternative or seek relief from the court under Florida Statute 682.04. Specifically, we saw this when AAA declined to arbitrate health care cases and the parties' agreement referred the case to that forum.

A similar issue with an identical outcome arose in a homeowner's association - country club dispute in BallenIsles Country Club, Inc., Ballen Isles Community Association, Inc. et al. v. Dexter Realty d b a BallenIsles Realty (Damoorgian, May and Ciklin).

In this case, the arbitration clause was extremely broad (each and every dispute, claim or other matter of disagreement... shall only be decided by arbitration).

The procedure was for different representatives on the association board to pick arbitrators. However, by the time the dispute arose, the representatives were no longer on the board.

The court first acknowledged that disputes over arbitration are typically analyzed in favor of arbitration. The court then held that the procedural clause did not appear to limit or curtail the breadth of the arbitration provision, which was in fact repeated twice (shall only be decided by arbitration).

The court concluded, "the mere fact that the arbitration procedure that the parties selected cannot be implemented... does not limit the broad scope of the arbitration clause."

Often when the majority portion of an appellate decision is short and a separate concurring/dissenting opinion is long, there frequently is some great legal pursuit afoot. The case of Jaylene, Inc, Candansk, Dansk Management, Inc.; Senior Management Services a/k/a Carrington Place Care Center v. Marguerite Steuer by and through Victoria Paradise (Davis, Villanti, and Northcutt) is one such example. Moreover, this case not only has the chance of further appeal to the state supreme court, there is even a hint of constitutional challenges which might meander to the U.S. Supreme Court -- much like Buckeye Check Cashing v. Cardegna did only a few years ago.

As a bonus, the concurring opinion quotes this 2005 article which pointed out that the placement of liability limitation clauses and the arbitration clause could jiggle out differing results. That same article also bird-dogged the conflict which the Second DCA now openly admits exists. "Emerging Trends" indeed.

As we saw in our last post, the first issue between the parties was the question of whether the POA had authority to sign the admission agreement and arbitration provision on behalf of the nursing home resident. In a swift and fact-less paragraph or two, the court concluded that the POA was empowered to make that decision.

The court briefly referenced that the arbitration clause called for the AHLA / NHLA to decide the case but overlooked the nettlesome issues involved in that issue.

It appears the contract(s) in question include terms which potentially limit the defendants' liability. The question turned to whether the court or the arbitrator takes the first crack at that issue. The appellate court took the trial court to task for overlooking the Rollins, Inc. v. Lighthouse Bay Holdings, Ltd. opinion where the Second DCA held that question was first for the arbitrator. Of note, the First, Fourth and Fifth Districts are in conflict on that point. See Alterra v. Linton, Alterra v. Bryant, and SA-PG-Ocala v. Stokes.

One would think the issue ends there. Judge Northcutt, however, points out some interesting facets to the conflict.

The concurrence argues that the Second District (Rollins) method is better because (1) it honors the parties' agreement to arbitrate, (2) it avoids differing results based only upon where the drafter places the limitation-on-damages clause, (3) it avoids differing results dependent on the existence of a severance clause, and (4) it avoids considering unripe issues.

There are two problems: (1) the first prong of the Seifert test calls upon the trial court to consider the validity of an agreement to arbitrate, including applying the "violation of public policy" common law defense to contracts and (2) the question of whether the five grounds to vacate an arbitration award in Florida Statute 682.13(1) would empower the trial court to later address public policy arguments.

The hitch, according to Northcutt, turns considerably on whether the limitations of liability are IN the arbitration clause or placed elsewhere in the contract. He suggests that, if the two provisions are placed together, the trial court may decide that the arbitrator exceeded its power under Florida Statute 682.13(1)(c). But, if the provisions were separated, Judge Northcutt suggests that the trial court may not have the power to review.

The Second District has been busy recently with a pair of nursing home arbitration decisions which reflect that the court (1) acknowledges it is in conflict with other districts on whether courts or arbitrators should consider public policy challenges and (2) continues to clean up the mess over the scope of durable powers of attorney caused by an aberrant, earlier decision. The case of Candansk, LLC a/k/a Carrington Place Care Center, Senior Health Management, et al. v. Estate of Opal Hicks by and through Robert Brownridge (Kelly, Whatley, and Davis) involves the latter issue.

The durable power of attorney (DPOA or POA) form at issue empowered the daughter to sign the admission agreement and arbitration clause since it states that "my attorney in fact shall act in my name, place, and stead in any way which I could do... [including] (h) claims and litigation... [and] (n) all other matters."

The plaintiff, seeking to avoid arbitration, claimed generally that the POA failed to specifically include the right to agree to arbitration and/or waive a state right to jury trial. The plaintiff also argued that the POA was limited to only property decisions.

The appellate court first dismissed the estate's argument that a POA form needs to specifically grant authority to agree to arbitration -- avoiding a "magic word" or other bright line test which would have singled out arbitration as a decision which would have needed to be listed by name in general POA forms (again, at least for broad grants of authority, having courts nit-pick through POAs likely defeat the purpose).

The court stated, "[A] power of attorney need not expressly refer to arbitration to confer the authority to agree to this method of disputes resolution."

Turing to the estate's apparently regrettable argument that the POA was limited to property rights and not constitutional rights, the appellate court flogged both the lawyers and trial court for overlooking a 1950 U.S. Supreme Court case which noted that a cause of action is property.

Some of the same defendants and all of the same lawyers were involved in a prior appeal, Carrington Place v. Milo. Since an earlier case called McKibbin v. Alterra, the Second District has been backpedaling while other courts have assisted in the clarification as we discussed here and here.