Federal and State Judicial Attitudes Toward Arbitration
The U.S. Supreme Court has repeatedly held that the FAA establishes “a liberal federal policy favoring arbitration agreements.” In Moses H. Cone Memorial Hospital v. Mercury Construction Corp., the Court found that the FAA establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a defense to arbitrability.
have similarly endorsed arbitration clauses as being “generally favored by the courts.” In MV Insurance Consultants v. NAFH National Bank, the Third District Court of Appeal noted that “[i]t is well-established that Florida law and public policy strongly favors arbitration and courts are encouraged to resolve all doubts in favor of arbitration.” The Florida Supreme Court has stated that “arbitration is a favored means of dispute resolution and courts indulge every reasonable presumption in upholding proceedings resulting in a binding arbitration.”
One illustrative example of Florida courts favoring arbitration is the line of cases which hold that even where the contract as a whole may have been procured by fraud, the arbitration clause is still valid unless the fraud was directed at the clause itself. In Simpson v. Cohen, the Florida Fourth District Court of Appeal held that “it is well-established that a dispute must be arbitrated where a complaint alleges fraud seeking to avoid or invalidate an entire agreement, rather than just the arbitration clause contained within the agreement.” The court found that “[i]t is only where the complaint specifically challenges the arbitration clause that a trial court is permitted to determine the validity of the arbitration clause before submitting the remainder of the dispute to arbitration.” Similarly, in Beaver Coaches, Inc. v. Revels Nationwide R.V. Sales, Inc., the court made clear that “arbitration clauses are ‘separable’ from the contracts in which they are imbedded, and that where no claim is made that fraud was directed to the arbitration clause itself, a broad arbitration clause will be held to encompass arbitration of the claim that the contract itself was induced by fraud.” The court noted that where there is a broad arbitration clause “only the most forceful evidence of a purpose to exclude the claim from arbitration can prevail.”
Although this language may sound daunting to a practitioner seeking to avoid arbitration, both Florida and federal courts have made clear in recent years that the presumption in favor of arbitration is not absolute. As the U.S. Supreme Court made clear in AT&T Mobility LLC v. Concepcion, arbitration is a matter of contract. Courts, therefore, are instructed to place arbitration agreements on equal footing with other contracts and enforce them according to their terms.
In a recent U.S. Supreme Court case, Lamps Plus, Inc. v. Varela, the Court emphasized the fact that arbitration is, first and foremost, a matter of consent. In Lamps Plus, the Court wrangled with the question of when a party can compel class action arbitration pursuant to an arbitration provision. Writing for the majority, Justice Roberts noted that the first principle that underscores all of the Court’s arbitration decisions is that arbitration is strictly a matter of consent. The Court emphasized that the task for courts and arbitrators is to give effect to the intent of the parties. The Court further explained that parties are free to authorize arbitrators to resolve certain questions, such as whether the parties have a valid arbitration agreement or whether an arbitration clause applies to a certain type of controversy, but the Court will not presume that such authorization has been given based on silence or ambiguity. Therefore, the Court would not infer consent to participate in classwide arbitration without an “affirmative contractual basis for concluding the parties agreed to class arbitration.”
To hold otherwise invites the risk of forcing unwilling parties to arbitrate a matter they reasonably would have thought a judge, not an arbitrator, would decide.
Recent federal district court cases also reflect this emphasis on the importance of analyzing arbitration agreements the same way as any other contract. In Rightnour v. Tiffany and Company, the Southern District Court of New York found that “a party to an agreement may not be compelled to arbitrate its dispute with another unless the evidence establishes a clear, explicit and unequivocal agreement to arbitrate.” The court went on to state that “the presumption in favor of arbitrability should only be applied where a validly formed and enforceable arbitration agreement is ambiguous about whether it covers the dispute at hand. In other words, while doubts concerning the scope of an arbitration clause should be resolved in favor of arbitration, the presumption does not apply to disputes concerning whether an agreement to arbitrate has been made.” Cases like Rightnour
demonstrate one way in which courts can resist arbitration, even despite the strong language of the FAA.