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For the second time in as many months, the Supreme Court of Florida has handed down an important opinion of broad application to Florida’s business community. In the wake of restricting the economic loss rule to only products liability cases in Tiara Condominium Association, Inc. v. Marsh & McLennan Companies, Inc., No. SC10-1022 (March 7, 2013), the Supreme Court of Florida held last week in Raymond James Financial Services, Inc. v. Barbara J. Phillips, et al., No. SC11-2513 (May 16, 2013) that Florida’s statutes of limitation apply to arbitrations.

Writing for a unanimous court, Justice Barbara Pariente delivered a thoughtful, well-reasoned opinion holding that Florida’s statutes of limitation apply to arbitrations. It is also the second significant pro-arbitration decision by the Supreme Court of Florida in this term. In George Jackson v. The Shakespeare Foundation, Inc., No. SC11-1196 (January 31, 2013), the court resolved a split among the district courts of appeal to hold that where there is a contractual nexus between claims of fraud and the underlying contract, such claims are subject to the arbitration clause in the agreement.

For well over a year, the securities industry, commercial arbitration community, plaintiffs’ attorneys, and legal scholars have closely monitored the appeal of the decision in Barbara J. Phillips, et al. v. Raymond James Financial Services, Inc. (Phillips) rendered by the Second District Court of Appeal on November 16, 2011. Because this statute of limitations issue was of great public importance, a number of amicus curiae briefs were filed in the case. McDonald Hopkins and other law firms served as counsel to the Miami International Arbitration Society, which filed an amicus brief in the Phillips case.

Florida’s statutes of limitations are contained in Chapter 95 of the Florida Statutes. The statutes of limitation described in Chapter 95 apply to any “civil action or proceeding.” Fla. Stat. § 95.011. Chapter 95 does not expressly define “action” or “proceeding.” The use of this undefined phrase sparked significant debate and motion practice in the securities arbitration arena in the last few years. In overturning the lower court’s decision, the Supreme Court in Phillips eschewed the notion that the legislature did not intend to incorporate arbitrations within the ambit of this phrase.

The Court employed a multitude of canons of statutory interpretation in reaching its decision.

  • It examined the ordinary use of the words “civil action or proceeding” as they are defined in Black's Law Dictionary, concluding that the term “proceeding” in Section 95.011 was intended to be broad and included arbitration.
  • It gave meaning to all of the terms appearing in the statute. In this regard, the court found it noteworthy and instructive that while the legislature qualified “actions” with the word “civil” it chose not to do so with respect to “proceeding.” The absence of the qualifying term “civil” – according to the court – evinced the legislative intent to make the statute broad.
  • It read Section 95.03 together with other sections of Chapter 95. Noting that Section 95.03 provides that any contract attempting to shorten the statutes of limitation are void, the Court reasoned that interpreting the term “proceeding” to exclude arbitration would defeat the purpose of Section 95.03, because then an arbitration agreement could be used to shorten the statute of limitations.
  • It searched other Florida Statutes to discern whether arbitration was included anywhere within the meaning of the term “proceeding.” After noting that two sections of Florida’s Arbitration Code (Chapter 682) refer to “arbitration proceedings,” the Court concluded that the “legislature has explicitly recognized that the term ‘proceeding’ is not confined to judicial proceedings and that arbitration is a type of proceeding.”
  • It cited the legislative history of Chapter 95 in concluding that when the legislature enacted Section 95.011 in 1974, the statutes of limitation were extended to include any “civil action or proceeding.” Section 95.03 was amended at the same time to substitute "civil action or proceeding" for "suit," making the two statutes consistent with each other.
  • It cited to the overall public policy purpose of statutes of limitation to discourage stale claims. Interpreting Section 95.011 to exclude arbitrations would permit claimants in arbitration to sit idly by to prosecute their claims while evidence could be lost with the passage of time, in contravention of the purpose behind statutes of limitation.

Had the Supreme Court of Florida arrived at a different result in the Phillips case, it would have been a significant public policy shift with a number of deleterious effects. No statutes of limitation would apply in arbitration. As pointed out by the court, “arbitration proceedings are utilized in a wide array of contexts.” Without the protection of the state’s statutes of limitation, brokerage firms, as well as domestic and international companies conducting business in this state, would have been forced to rewrite their arbitration agreements to provide an express limitations period and/or specific reference to the statutes of limitations found in Chapter 95 of the Florida Statutes. Because of the uncertainty associated with the enforceability and breadth of such provisions, some companies may have avoided doing business in the state altogether. In the interim, countless stale claims would have been resurrected, causing an influx of expensive litigation fraught with evidentiary issues. These were some of the key policy points, among others, raised by the Miami International Arbitration Society in its amicus brief.

While the Phillips case did not, in the end, turn on the particular language of the arbitration clause, the potential outcome of the Phillips case as well as other decisions in the arbitration arena serve as reminders that arbitration clauses should be drafted with caution. Clients and the attorneys who offer them advice on the subject of arbitration clauses should remain abreast of the developing law created by decisions of the Supreme Court of Florida.

For more information, please contact:

Raquel (Rocky) A. Rodriguez
305.704.3994
rrodriguez@mcdonaldhopkins.com

Jeremy M. Colvin
561.472.2971
jcolvin@mcdonaldhopkins.com

Business Litigation

We understand the importance of focusing on our clients’ business when confronted with, or pursuing, litigation. Our first priority is the successful and efficient handling of client-critical business issues when the need for litigation assistance occurs. Our deep bench of trial attorneys includes an exceptional array of trial, arbitration and mediation experience involving high stakes litigation with a track record of achieving effective results.

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