DON’T WAIVE YOUR RIGHT TO ARBITRATE (UNLESS YOU WANT TO!)

shutterstock_348755237Does your construction contract require you to arbitrate (instead of litigate) disputes arising out of the contract?  If so, and you want to arbitrate, you do NOT want to do anything inconsistent or adverse with your right to arbitrate. Arbitration can be waived and you do not want arbitration to be waived if you believe this is the best forum to resolve your construction dispute.  For instance, actively participating in a lawsuit through the prosecution or defense of issues in the lawsuit is certainly inconsistent with your right to arbitrate.  This will result in a waiver of your right to compel arbitration.  

 

In a non-construction dispute—a dispute involving a law firm and its former partner—the law firm sued the partner.  Chaikin v. Parker Waichman LLP, 42 Fla. L. Weekly D2165b (Fla. 2d DCA 2017).  There was a partnership agreement that required disputes to be resolved by arbitration.  The law firm sued the partner claiming he violated a previously entered employment agreement that did not require arbitration.   When the partner counterclaimed, the law firm claimed that the counterclaim must be compelled to arbitration because the counterclaim arose out of the partnership agreement that required arbitration.  Guess what?  The trial court actually compelled the counterclaim to arbitration!  Crazy!  Clearly, any employment agreement and partnership agreement were intertwined such that the dispute would involve the same set of facts and any claims would have a significant relationship to the partnership agreement. 

 

On appeal, the Second District recognized this craziness and the significant relationship between any claims under an employment agreement and those under the partnership agreement:

 

[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.

Chaikin quoting Olson v. Fla. Living Options, Inc., 210 So.3d 107, 111 (Fla. 2d DCA 2016) 

 

Accordingly, the Second District held: what is sauce for the goose is sauce for the gander.  The law firm, by filing suit notwithstanding the arbitration provision in the partnership agreement, waived its right to compel arbitration of the counterclaim.  Chaikin, supra (explaining that the law firm initiating the lawsuit was adverse to its contention that its former partner’s counterclaims, predicated upon the same partnership agreement, be compelled to arbitration).  Do not waive your right to arbitrate (unless you want to!).  

 

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.

BE CAUTIOUS WHEN FILING YOUR LAWSUIT IF YOU REALLY WANT TO ARBITRATE

Lawsuit If you really want to arbitrate your construction dispute pursuant to your contract, DO NOT file a lawsuit without at least contemporaneously moving to stay the lawsuit and compel arbitration.  Otherwise your right to arbitration will be waivedThe determination as to whether a party waived their right to arbitrate is a determination for the court (not the arbitrator) as demonstrated in the non-construction case of Cassedy, Jr. v. Hofmann, 39 Fla. L. Weekly D2450a (1st DCA 2014).

 

In this case, the plaintiffs filed a lawsuit against their stockbroker that they voluntarily dismissed without prejudice years later.  The plaintiffs then initiated arbitration with the Financial Industry Regulatory Authority.  The defendant filed a lawsuit to prevent the arbitration from going forward arguing that the plaintiffs waived their right to arbitration by initiating the lawsuit that they subsequently dismissed.  The First District Court of Appeals held the trial court must conclude whether a party waived their right to arbitrate by acting inconsistently with the right to arbitrate a dispute. The First District did not decide whether the right to arbitration had been waived; however, considering the plaintiffs filed the very lawsuit that they subsequently dismissed, it would appear that this right was waived or should be deemed waived.  If the plaintiffs really wanted to arbitrate, they should not have first filed a lawsuit without preserving their right to arbitrate through a contemporaneous motion to stay the lawsuit and compel arbitration.

 

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.