Since the signing of the Declaration of Independence in 1776, our society has dubbed certain rights to be “inalienable,” but the right to arbitrate is not among them. A contractual right to arbitrate is not absolute and can be waived by the parties. “The waiver of the right to arbitrate may be expressed in terms or be implied from the acts, omissions and conduct of a party.” Hall v. Nationwide Mut. Ins. Co., 189 So.2d 224, 225 (Fla. 4th DCA 1966).
By default, parties often commence litigation in courts even if there is a contract containing an arbitration clause. In responding to the complaint, the defendant must act expeditiously and cautiously in order to preserve the right to arbitrate. Florida courts have broadly held that active participation in litigation in court or otherwise engaging in actions inconsistent with the right to arbitrate will constitute wavier of the right to arbitration. In Andre Franklin, Inc. v. Wax, 2014 WL 5002130 (Fla. 2d DCA Oct. 8, 2014) (NOT FINAL SUBJECT TO REVISION OR WITHDRAWAL), the Second District Court of Appeal of Florida recently examined the type of conduct that would be tantamount to waiver of the right to arbitrate.
In that case, Mr. and Mrs. Wax entered into a contract with Andre Franklin to restore a historic home, and the contract contained an arbitration clause. When a dispute arose over payment, Mr. and Mrs. Wax filed a complaint against Andre Franklin in a Florida state court. In response to the complaint, Andre Franklin simultaneously filed (1) a motion to compel arbitration, (2) a motion to abate the state court case, (3) a motion to dismiss the state court case on technical grounds, (4) an answer and affirmative defenses, and (5) counterclaims for foreclosure of lien and breach of contract. At a subsequent hearing, the trial court granted the Andre Franklin’s motion to dismiss, and Mr. and Mrs. Wax filed an amended complaint to cure the pleading defects. Unfortunately, the opinion does not explain how the trial court disposed of or addressed the motion to compel arbitration at the hearing.
In response to the amended complaint, Andre Franklin simultaneously filed (1) a motion to compel arbitration, (2) motion to abate the state court case, and (3) an answer and affirmative defenses to the amended complaint. At a hearing on the motions, Mr. and Mrs. Wax argued, and the trial court agreed, that Andre Franklin had waived its right to arbitrate by filing counterclaims and arguing its motion to dismiss the original complaint at the previous hearing, perceiving such conduct as being inconsistent with the right to arbitrate.
In reversing the trial court’s finding of waiver of the arbitration clause, the Second District concluded that the defendant’s filing of the counterclaims, motion to dismiss, and a motion to compel arbitration, without more, did not constitute a waiver of the right to arbitrate. Because Andre Franklin had not engaged in any discovery, there was no evidence of waiver of the right to arbitrate. As noted by the Second District, waiver often hinges upon whether the party seeking to compel arbitration engaged in any discovery. On this point, the court analyzed two cases from a sister court in Florida. For instance, the defendant was found to have waived the right to arbitrate in Coral 97 Associates, Ltd. v. Chino Electric, Inc., 501 So. 2d 69 (Fla. 3d DCA 1987) where the defendant simply filed a notice of taking deposition of the plaintiff prior to the hearing on its motion to dismiss. A year after the Coral case was decided, the Third District clarified the Coral holding in Concrete Design Structures, Inc. v. P.L. Dodge Foundation, Inc., 532 So. 2d 1334, 1335 (Fla. 3d DCA 1988), explaining that “it was the act of implementing discovery [in the Coral case], following the simultaneous filings of the counterclaim and motions to arbitrate and dismiss, that was held inconsistent with and thus a waiver of the arbitration right.”
Parties desiring to arbitrate their disputes must expeditiously file a motion to compel arbitration with the court and must refrain from taking any action inconsistent with the right to arbitrate, particularly engaging in any kind of discovery. Failure to follow these general principles may result in a judicial finding of waiver of the right to arbitrate, thereby negating all of the reasons why the arbitration clause was included in the operative contract in the first place (e.g. the fact that arbitration is generally quicker to resolution than litigation, generally less expensive than litigation, permits more streamlined discovery, allows the parties to have a voice in selecting the person(s) to preside over the dispute, provides for less formal rules of evidence and procedure, resolves the dispute in a more private forum, etc.).