DOWNSIDE OF A BROAD ARBITRATION PROVISION

imagesIn Sunsplash Events Inc. v. Robles, 39 Fla. L. Weekly D2368a (Fla. 4th DCA 2014), the plaintiff entered into an employment agreement with the defendant. The employment agreement contained an arbitration provision that read, “[T]he Parties hereby agree and specifically stipulate that all differences, claims or matters of dispute relating to the performance of duties and/or benefits arising between the Parties to this Agreement contained herein shall be submitted to a mutually acceptable arbitrator….” Contemporaneously with the execution of the employment agreement, the parties entered into a bill of sale agreement regarding the plaintiff’s existing business whereby the plaintiff sold the inventory and goods of that business to the defendant.  This separate bill of sale agreement did not contain an arbitration provision.

 

Plaintiff thereafter sued the defendant relating to the bill of sale agreement (that did not contain an arbitration provision) and the defendant moved to compel arbitration based on the arbitration provision in the employment agreement. The plaintiff’s claims were interrelated to the employment agreement.

 

The Fourth District Court of Appeal held that the arbitration provision in the employment agreement included plaintiff’s claims relating to the bill of sale agreement because the claims fell within the ambit of the employment agreement’s broad arbitration provision:

 

“[T]he plaintiff’s claims relating to the bill of sale agreement have a significant relationship to the claims relating to the employment agreement. According to the second amended complaint, the numerous misrepresentations alleged to have been made by the company president to induce the plaintiff into entering the bill of sale agreement are the same misrepresentations alleged to have been made to induce the plaintiff into entering the employment agreement. As a result, the claims relating to the bill of sale agreement are inextricably intertwined with the transaction from which the employment agreement emanated and the employment agreement itself.”

 

 

This case contains an important holding–a broad arbitration provision can compel parties to arbitrate a dispute under a separate agreement that does not contain an arbitration provision.  Thus, this goes back to the fundamental premise that parties should not include an arbitration provision if they do not want to arbitrateAnd, if an arbitration provision exists in one agreement and not a separate agreement (whether simultaneously executed or executed on a subsequent date), that separate agreement should clarify it is not subject to the arbitration provision in the earlier agreement.

 

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.