arbitration

Significant Relationship between Claim and Agreement to Arbitrate

Posted by David Adelstein on March 25, 2017
Trial Perspectives / Comments Off on Significant Relationship between Claim and Agreement to Arbitrate

Just because you have an agreement to arbitrate does not necessarily mean that every conceivable claim, including those unrelated to the agreement, are subject to arbitration.   For instance, if there are separate agreements—one with an arbitration clause and another without—does not mean that a claim related to the agreement without an arbitration clause will be subject to arbitration per the separate agreement.   There needs to be a “significant relationship” between the agreement containing the arbitration provision and the claim, as best explained as follows:

[T]he mere coincidence that the parties in dispute have a contractual relationship will ordinarily not be enough to mandate arbitration of the dispute.” Rather, “there must exist a significant relationship between the claim and the agreement containing the arbitration clause.” The Florida Supreme Court has expanded upon the definition of “significant relationship” as follows:

A “significant relationship” between a claim and an arbitration provision does not necessarily exist merely because the parties in the dispute have a contractual relationship. Rather, a significant relationship is described to exist between an arbitration provision and a claim if there is a “contractual nexus” between the claim and the contract. A contractual nexus exists between a claim and a contract if the claim presents circumstances in which the resolution of the disputed issue requires either reference to, or construction of, a portion of the contract. More specifically, a claim has a nexus to a contract and arises from the terms of the contract if it emanates from an inimitable duty created by the parties’ unique contractual relationship. In contrast, a claim does not have a nexus to a contract if it pertains to the breach of a duty otherwise imposed by law or in recognition of public policy, such as a duty under the general common law owed not only to the contracting parties but also to third parties and the public.

Timber Pines Plaza, LLC v. Zabrzyski, 42 Fla. L. Weekly D587a (Fla. 5th DCA 2017 (internal citations omitted).

An example of this can be found in the Time Pines Plaza case.   Here, an owner of a shopping outlet mall contracted to sell outparcels of land to a buyer.  The contract for sale contained an arbitration provision.   Thereafter, and prior to closing, the owner issued amended deed restrictions on one of the outparcels that required plans for future construction to be submitted to the owner for pre-approval. The buyer signed an acknowledgment of its receipt of the amended deed restrictions. (There was no arbitration clause in this deed restrictions.)

After closing, the owner sued the buyer arguing that the buyer commenced construction without obtaining plan approval as required by the amended deed restrictions.   The buyer counter-sued with a claim asserting that owner breached the contract for sale.   The owner moved to compel this counterclaim to arbitration based on the arbitration provision in that contract.

The issue was whether the owner’s original claim relating to a breach of the amended deed restrictions had a significant relationship to the contract for sale such that it should have been subject to arbitration. If it should have been, there was an argument that the owner waived the right to arbitrate by initiating the lawsuit.

The court found that no significant relationship existed between the contract for sale and the amended deed restrictions. There was no contractual nexus with the argument that the buyer commenced construction without seeking approval and the contract for sale. The contract for sale contained no obligation regarding commencing construction before obtaining prior approval; this issue was only contained in the amended deed restrictions. “Of course, the instant dispute would not exist had the parties not contracted for the purchase and sale of the North Outparcel, but ‘the mere fact that the dispute would not have arisen but for the existence of the contract and consequent relationship between the parties is insufficient by itself to transform a dispute into one ‘arising out of or relating to’ the agreement.’” Timber Pines Plaza, supra (citation omitted).

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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De Novo Standard of Appellate Review for Construction of Arbitration Provision

Posted by David Adelstein on February 10, 2016
Standard of Review / Comments Off on De Novo Standard of Appellate Review for Construction of Arbitration Provision

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Your contract contains an arbitration provision meaning you are required to arbitrate your dispute instead of litigate your dispute (in court).  Nonetheless, your opponent files a lawsuit against you and you move to compel the dispute to arbitration pursuant to the arbitration provision in your contract.  But, the trial court denies your motion to compel arbitration based on its interpretation of the arbitration provision. So, what do you do? You file an interlocutory appeal to appeal this ruling since you want to arbitrate your dispute.  The appellate standard of review for the construction (interpretation) of an arbitration provision is de novo.  See MuniCommerce, LLC v. Navidor, Ltd., 41 Fla. L. Weekly D317b (Fla. 4th DCA 2016) (reversing trial court’s order compelling arbitration based on its construction of arbitration provision).  

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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Arbitration and the Lax Rules of Evidence

Posted by David Adelstein on October 02, 2015
Evidence / Comments Off on Arbitration and the Lax Rules of Evidence

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I’m sure you have heard of arbitration.  Arbitration is a method of dispute resolution.  If parties want to arbitrate their dispute as opposed to litigate their dispute in court, they need to include an arbitration provision in their contract.  This is because arbitration is a creature of contract and you cannot be compelled to arbitrate a dispute that you did not contractually agree to arbitrate as the method of dispute resolution.  (If you are arbitrating your dispute, then you are not litigating your dispute in court.)

In arbitration, the rules of evidence are lax.  For example, Rules 35 and 36 of the Construction Industry Arbitration Rules promulgated by the American Arbitration Association state in relevant portion:

R-35. Evidence

(a)  The parties may offer such evidence as is relevant and material to the dispute and shall produce such evidence as the arbitrator may deem necessary to an understanding and determination of the dispute. Conformity to legal rules of evidence shall not be necessary.

(b)  The arbitrator shall determine the admissibility, relevance, and materiality of the evidence offered. The arbitrator may request offers of proof and may reject evidence deemed by the arbitrator to be cumulative, unreliable, unnecessary, or of slight value compared to the time and expense involved. All evidence shall be taken in the presence of all of the arbitrators and all of the parties, except where: 1) any of the parties is absent, in default, or has waived the right to be present, or 2) the parties and the arbitrators agree otherwise.

(c)  The arbitrator shall take into account applicable principles of legal privilege, such as those involving the confidentiality of communications between a lawyer and client.

R-36. Evidence by Affidavit and Post-Hearing Filing of Documents or Other Evidence

(a)  The arbitrator may receive and consider the evidence of witnesses by declaration or affidavit, and shall give it such weight as the arbitrator deems it entitled to after consideration of any objection made to its admission.

These rules are designed to be much more liberal and flexible than the rules of evidence that govern litigation in court.  These rules give the arbitrator tremendous discretion to weigh the value of the evidence presented and progress the arbitration forward based on his/her understanding of the evidence and issues.  Naturally, with such lax rules of evidence, it is easier to present and admit evidence in arbitration than litigation, especially since arbitration does not require you to conform to the rules of evidence.  Sometimes this is beneficial.  Sometimes it is not.  

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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