I recently wrote in Fox Rothschild’s Consumer Law Ledger about a Florida appellate court’s ruling that the statute of limitations for a negligent appraisal claim begins to run on the date that the loan is funded, even if a loan default does not occur until much later.

I’ve been told that a Motion for Rehearing En Banc or for Certification for the Florida Supreme Court will be filed by the lender. So, we may not have heard the end of the Llano Financing Group, LLC v. Petit case just yet.

We’ll keep an eye on this one to see if there are any changes to this ruling.

arbitrationIt is no secret that arbitration has become a common alternative to traditional courtroom litigation.  Arbitration clauses are widely employed in domestic and international commercial contracts.  With the advent of the global economy, contracting parties from different countries often rely on arbitration clauses to select a neutral forum and venue for resolving contract disputes.  And, in both the domestic and international context, contracting parties often favor arbitration because they believe it is a more rational process than a jury trial, while also being faster and less expensive than traditional litigation.  (Speed and cost are usually dependent on the particular rules of the arbitration and the nature of the dispute, however.  These are issues which should be discussed with an attorney prior to agreeing to an arbitration provision.)  Arbitration clauses can also be found in all sorts of consumer contracts, from cell phone agreements to the back of ballpark and movie theater admission tickets.

The popularity of arbitration is buoyed by the fact that the United States and most states have enacted legislation encouraging arbitration on public policy grounds and providing for the recognition and enforcement of arbitral awards.  For example, the Federal Arbitration Act, codified as 9 U.S.C. § 1 (available here or here), was enacted in 1925.  The current version of Florida’s arbitration statute, the Revised Florida Arbitration Code, codified as § 682.01, Fla. Stat., et seq., was enacted in 2013 (available here).

But, at its heart, arbitration is a consensual, contractual procedure.  A party cannot be forced to arbitrate unless it has consented to arbitration.  Unsurprisingly, in many disputes there is an initial dispute over whether the parties have in fact agreed to arbitration.  Often, the plaintiff will file a lawsuit in court seeking a jury trial, and then the defendant will file a motion to compel arbitration, asserting the existence of an arbitration agreement.  Thus, a body of law has grown around the threshold question of “arbitrability,” which is the term used to describe the analysis of whether or not a particular dispute is subject to arbitration.  (The Supreme Court undertook such an analysis of applicable federal law in the case of Rent-a-Center v. Jackson, 130 S.Ct. 2772, 2775 (2010), holding that under the Federal Arbitration Act, courts usually determine the threshold question unless the parties have agreed to refer the threshold question to the arbitrator).

Florida Rules For Arbitrability In Arrasola v. MGP Motor Holdings, LLC

Recently, in the case of Arrasola v. MGP Motor Holdings, LLC, Case No. 3D15-381 (3d DCA August 5, 2015), Florida’s Third District Court of Appeal addressed the issue of who decides threshold questions of arbitrability—the court or the arbitrator—under Florida’s Revised Arbitration Code.  The case involved a dispute centering around the sale of an automobile.  The underlying facts of the disputed transaction are not germane to a discussion of the arbitrability analysis, but the case generally involved tort and statutory claims brought by the purchasers against the auto dealer.  The purchase order for the vehicle had an arbitration clause which provided that any dispute would be referred to arbitration, including any dispute about as to “the validity of this [arbitration] provision.”  The purchasers filed their lawsuit in state court and the auto dealer filed a motion to compel arbitration, which was granted.  The purchasers appealed the trial court’s order granting the motion to compel, contending that the purchase order was invalid for a variety of reasons and thus the arbitration provision was not applicable.

The appellate court boiled down the issue to a question of arbitrability, stating that, “The issue … is not whether the Arrasolas may litigate, rather than arbitrate, their substantive claims against [the auto dealer].  The issue is whether there was an agreement to arbitrate the threshold determination of contract enforceability, termination, abandonment, rescission, or unconscionability.”  The appellate court applied the “gatekeeper” provision of Section 682.02 of the Revised Florida Arbitration Code (§ 682.02, Fla. Stat., available here).  Section 682.02 provides that “the court shall decide whether an agreement to arbitrate exists or a controversy is subject to an agreement to arbitrate,” but “an arbitrator shall decide whether a condition precedent to arbitrability has been fulfilled and whether a contract containing a valid agreement to arbitrate is enforceable.”  This seemingly confusing language relates specifically to the question of arbitrability.

In its review, the appellate court first noted that the trial court correctly determined that the arbitration clause was enforceable because there was no evidence of unconscionability with respect to the arbitration clause (notwithstanding any questions regarding the contract as a whole) and it was undisputed that the parties signed the purchase order.  Then, the appellate court noted the important difference between a challenge to the entire contract versus a challenge to just the arbitration provision included within the contract.  The appellate court pointed to Section 682.02 and the Supreme Court decision of Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 444-45 (2006) (which had reversed an earlier decision of the Florida Supreme Court), both of which provide that challenges to the entire contract are questions for the arbitrator, whereas challenges to just the arbitration provision are for the court.  The appellate court agreed with the trial court that the Arrasolas’ additional arguments that the entire contract had been terminated or abandoned should be decided by the arbitrator, and confirmed the trial court’s order compelling arbitration.

The Process May Not Be Intuitive, But It Is Mandated By Law

 The result in Arrasola may seem illogical, in that the trial court was allowed to adjudicate the validity of the arbitration clause, but could not adjudicate the greater question of whether the entire contract (which contained the arbitration clause) was enforceable.  On a purely intuitive level, one would think that a successful challenge to the entire contract would void all the provisions of the contract, including the arbitration clause.  But, there is a legal reason, if not a common sense one, for this difference in who may adjudicate the challenges.  This dichotomy is mandated by the language of the Federal Arbitration Act, which was specifically intended to “overcome judicial resistance to arbitration” and “embod[y] the national policy favoring arbitration.”  (Buckeye Check Cashing, at pp. 443.)  Under the Federal Arbitration Act, “as a matter of substantive federal arbitration law, an arbitration provision is severable from the remainder of the contract.”  (Id., at p. 445.)  This means that, under the law, a contract can be found unenforceable as a whole, but the arbitration clause in the contract will still be enforced so long as the arbitration clause by itself was not the specific result of some sort of improper conduct.  (When might an arbitration provision be subject to challenge, separate from the entire contract, you ask?  Good question.  Examples might include situations in which the arbitration clause was slipped into the final version of an agreement without the other side knowing about it, or the arbitration provision was altered after the agreement was signed, or the provision was buried in fine print or disguised within the agreement so that the party was unaware that the contract contained an arbitration clause.)

Takeaways

The appellate court’s decision in Arrasola is important because it illustrates how courts should apply the new “gatekeeper” language of Section 682.02 of the Revised Florida Arbitration Code, which in turn should make the results of arbitration challenges more predictable.  In particular, Florida law now follows the same analysis as federal law under the Federal Arbitration Act, so challenges to just the arbitration provision will be decided by a trial court, whereas challenges to the validity of the entire contract are referred to the arbitrator.  When considering a contract, or whether to bring a lawsuit or initiate an arbitration to resolve a contract dispute, it is important to consult with an attorney to consider how the arbitration clause, and the contract as a whole, will be reviewed and enforced by the courts or the arbitrator.

Eric A. Bevan is an attorney with the law firm of Fox Rothschild LLP and a member of the firm’s Litigation, Financial Services Industry and Construction practice groups.  He represents clients in the resolution and litigation of complex commercial disputes, including federal and state court litigation as well as alternative dispute resolution methods such as private arbitration and mediation.  You can contact Eric at 561-804-4470 or ebevan@foxrothschild.com.

When commencing an appeal in Florida, timing is everything. For instance, the timely filing of a notice of appeal is a strict matter of subject matter jurisdiction. See Fla. R. App. P. 9.110(b); Miami-Dade Cnty. v. Peart, 843 So. 2d 363, 364 (Fla. 3d DCA 2003). If the notice of appeal is not filed within thirty days of the rendition of an order (either final or non-final), the appellate court is divested of subject matter jurisdiction by “an irremediable jurisdictional defect” and a litigant’s only right to appeal is gone. Peart, 843 So. 2d at 364. Similarly, if a motion for rehearing is not filed within fifteen days of the rendition of an opinion, the right to rehearing may be lost. See Hoenstine v. State Farm Fire & Cas. Co., 742 So. 2d 853, 854 (Fla. 5th DCA 1999) (denying as “unauthorized and untimely” a motion for rehearing that was one day late); see also Fla. R. App. P. 9.330(a). Thus, calculating the time requirements is essential to success on appeal.

As with trial court filings, Florida Rules of judicial Administration 2.514 & 2.516 provide the time computation requirements on appeal. Under rule 2.514, when time for the completion of an event—for example, the filing of a brief—is calculated in days, the calculation begins the day after the event that triggered the time period, and the last day of that period is counted in determining the end date. If the last day, however, is either a weekend or “legal holiday,” the end date is the next business day or non-legal holiday. Be sure to be careful regarding “legal holidays.” This term is defined under rule 2.514, and includes the mandatory holidays delineated by the Florida Legislature. Aside from those holidays, chief judges or the clerk’s office have discretion to add additional dates. As such, be sure to check your filing court’s holiday calendar when you believe a holiday may or may not give you extra time. If you believe a holiday may apply, and it does not, you may miss a crucial filing deadline.

Next, rule 2.514 provides that “”When a party may or must act within a specified time after service and service is made by mail or email, 5 days are added after the period that would otherwise expire under subdivision (a).” This five day additional period applies when service of a document was by mail or e-mail, and the party must respond in a period of time “after service.” If a rule or court order does not explicitly state that the person must act “after service,” the additional five days does not apply. See Miccosukee Tribe of Indians of Fla. v. Lewis, 122 So. 3d 504, 506 (Fla. 3d DCA 2013).For example, a party must file his notice of appeal within thirty days of rendition of the order appealed—not thirty days after service of the order. As such, the five day additional period does not apply when filing a notice of appeal and invoking the subject matter jurisdiction of the appellate court, even if the order is received by mail or email. Id. Furthermore, the additional five days applies when service was effectuated only by mail or email. If a party also effectuates service by another method—such as personal delivery or facsimile—along with mail or email, rule 2.516(2) requires the earlier end date to apply, i.e. the shorter period, which is that without the five days.

Accordingly, understanding how to compute time when calculating filing and service dates will help a litigator (on appeal and even at the trial court level) avoid missing crucial filing deadlines, perhaps give him or her a little more time than originally thought to complete a task, and may even provide a strategic advantage over an adversary who does not understand the time requirements of Florida’s Rules of Judicial Administration.