Commercial Litigation

Third DCA Makes Rare Finding Against Arbitrability where Arbitration Clause is Present in Contract

Third DCA Makes Rare Finding Against Arbitrability where Arbitration Clause is Present in Contract

On March 10, 2021, the Florida Third District Court of Appeal made a rare finding against arbitrability where an arbitration clause was present in a contract. Such a finding reminds contractors, vendors, and consumer service providers who seek to enforce arbitration to examine the terms of their arbitration provisions.

The Case

In City of Miami, the City appealed the trial court’s order granting summary judgment and ordering arbitration in a declaratory action, seeking strict application of the terms of the Collective Bargaining Agreement with respect to two former City police officers.

The City alleged that the officers were part of an improper tow truck scheme[1], which was investigated by Internal Affairs and the FBI.  As part of the Internal Affairs investigation, including interviews of the officers in the presence of their union representatives, Internal Affairs determined that the officers’ admissions and the totality of its investigation warranted disciplinary action.  The officers were given two options: termination or resignation. They each executed letters of resignation.

The Officers later filed grievances with the City, arguing their resignations were involuntary, and therefore, the City violated the Agreement’s terms for interrogating bargaining union members under investigation.  Before arbitration, the City filed an action for declaratory relief seeking judgment as to 1) whether an arbitrator had jurisdiction to determine if an employee voluntarily resigned; and 2) whether the arbitrator would then have jurisdiction to reinstate that employee based upon the voluntariness determination. The City argued that voluntariness issues were not subject to arbitration under the plain language of the Agreement. The officers filed a Motion for Summary Judgment arguing that their grievances were subject to arbitration.  The trial court found in favor of the officers and ordered arbitration, finding that the Agreement was broad enough to allow the arbitrator to determine voluntariness.

The Third District’s full opinion can be found here.

The Court’s Findings

The Court first considered whether summary judgment was appropriate. Under Florida law, summary judgment is proper if there is no genuine issue of material fact and if the moving party is entitled to a judgment as a matter of law.”[2] The officers below argued (and offered affidavits) that their resignations were executed under duress.  The City refuted this allegation and provided evidence in support of its position that the officers had resigned voluntarily.[3] Thus, there was a material issue of fact for the trial court to decide that precluded summary judgment.

The Third DCA then turned to whether an arbitrable issue existed under the facts.   Florida courts have long acknowledged a strong public policy in favor of arbitration.[4]  In fact, the Third and Fifth District Courts have held that “[a]ll questions concerning the scope of wavier of the right to arbitrate under contracts should be resolved in favor of arbitration rather than against it.” The Court also noted that “Although Florida law … favors arbitration, it is still true that ‘no party may be forced to submit a dispute to arbitration that the party did not intend to arbitrate.”[5]  The trial court’s role, therefore, in determining arbitrability under the Revised Arbitration Code is limited to the following inquiries:

“(1) whether a valid written agreement to arbitrate exists; (2) whether an arbitrable issue exists; and (3) whether the right to arbitration was waived.”[6]

The issue before the Third DCA was “whether an arbitrable issue exists?” Necessary to that decision was whether the officers voluntarily resigned, because voluntary resignations are not explicitly covered by the terms of the Agreement.  Having previously interpreted the same Agreement and holding that it should be narrowly construed, the Court opined that the Agreement’s arbitration provision expressly limits a union member to “appeal a suspension, demotion, or dismissal through the grievance procedure.” The Court found that the plan language of the Agreement limited the arbitrator’s authority to only certain grievances, which did not include voluntary resignation. The Court further found that the issues the parties agreed to submit to arbitration were limited and did not include issues of arbitrability. 

Therefore, an issue of fact remained—whether the officers resigned voluntarily or involuntarily—and summary judgment was precluded.  The Third DCA reversed and remanded for the trial court, not the arbitrator, to determine that threshold issue of fact.

What Does This Mean?

The Third DCA has taken a controlled, but unusual step back from the longstanding public policy in favor of arbitration provisions, and focused preliminarily on the threshold issue of arbitrability. Vendors with arbitration clauses in their service contracts should examine the language of their arbitration provisions to determine what types of claims are covered and if the claim is itself arbitrable.  In other words, what claims does the arbitrator have jurisdiction over?   Especially in consumer contracts, the arbitration clause must make it clear what the consumer agrees to arbitrate.  Florida courts generally classify arbitration agreements into two types: (1) narrow provisions which require arbitration for claims “arising out of” the subject contract; and (2) broad provisions which allow arbitration for claims “arising out of or related to” the subject contract. [7]  Courts have found that broad arbitration provisions for claims “arising out of or related to” the contract may be inclusive of tort claims, though some nexus between the dispute and contract containing the arbitration clause itself must be present.[8] It is foreseeable that in the Pest Services Industry, broad arbitration provisions would cover claims for bites and/or personal injury due to structural damage, as opposed repair only. Failure to include such a broad arbitration clause could result in bite or other personal injury cases being tried by a jury, or at the least, litigated in court as opposed to being arbitrated.

[1] The City alleged that there was a scheme whereby the officers would call a tow truck operator from the scene of an accident who would then tow cars to a particular repair shop.  According to the City, the officers were receiving kickbacks from the repair shop. During the investigation, the officers admitted to knowing the tow truck driver was under investigation and allowing him to tow vehicles from the accident scenes to which they responded.

[2] Volusia Cty. V. Aberdeen at Ormond Beach, L.P., 760 So.2d 126, 130 (Fla. 2000).

[3] In pertinent part, the City argued that the documents executed by the  Officers were union-approved form letters—inter-office memoranda with the subject “Voluntary Resignation,” which stated, in part, “I am voluntarily resigning form my position…[n]o threats, rewards, or promises have been made to me.  I have made this decision solely on my own premise.” See City of Miami, 2021 WL 900188 at ft. note 4.

[4] See, e.g., Waterhouse Contstr. Grp., Inc., v. 5891 SW 64th St., LLC, 949 So.2d 1095, 1099 (Fla 3rd DCA 2007)).

[5] Beck Auto Sales, Inc., v. Asbury Jax Ford, LLC, 249 So.3d 765 (Fla 1st DCA 2018).

[6] 3A Fla. Jur. 2nd Arbitration and Award §54.

[7] Cooper v. Rehabilitation Center at Hollywood Hills, Inc.,  305 So.3d 3 (Fla. 4th DCA 2020).

[8] Id.