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Incomplete Arbitration Provisions: Can an Arbitration Clause Apply to Only a Portion of a Commercial Dispute?

As a general rule, mandatory arbitration clauses are supposed to consolidate the dispute resolution process and minimize the financial burdens involved. The whole idea behind arbitration is that it is offers a streamlined process without the strictures and protracted timelines of litigation.

But, the benefits of mandatory arbitration presume that the parties’ arbitration clause is enforceable. While there are recognized judicial standards for the enforceability of arbitration clauses, many commercial disputes end up in litigation not over the substantive issues underlying the dispute, but over whether the arbitration clause itself is legally binding.

This was the issue in a recent case that made its way to Florida’s Second District Court of Appeal.

Multiple Agreements Create Question of Which Claims are Subject to Arbitration

In LTCSP-St. Petersburg, LLC, et al. v. Johnnie Earl Robinson (Fla. 2nd DCA Case No. 2D11-3473), the question was whether the parties’ entire dispute – or only a portion of their dispute – was subject to mandatory arbitration. The case involved a surviving husband’s negligence claims against a nursing home for wrongful death.

In order to admit the decedent to the nursing home, the husband signed an admission agreement under the authority of a power of attorney. The admission agreement included a mandatory arbitration provision. While the decedent was subsequently discharged, she was later re-admitted on several occasions, and each time she personally signed an agreement which stated, “THIS AGREEMENT MUST BE SIGNED BY . . . THE SAME PERSON [] WHO SIGNED THE ORIGINAL ADMISSION AGREEMENT, OR A NEW ADMISSION AGREEMENT MUST BE SIGNED.”

The nursing home never required the decedent to sign a new admission agreement, and the husband never signed anything after the initial admission.

As a result, when the husband sued for wrongful death, the question arose: Were the parties required to arbitrate? The nursing home argued that all claims should be arbitrated, while the husband argued that, at most, only claims arising out of the initial visit should be subject to mandatory arbitration.

The Second District Court of Appeal concluded that, based on the limiting language contained in the documents signed by the decedent, the nursing home could only compel arbitration for claims arising out of the initial admission.

While the husband’s filings did not differentiate between the various admissions, it is probably a safe bet that at least a portion of the parties’ substantive dispute will be resolved through litigation.

Lessons Learned: The Importance of Careful Contracting

This case provides an important lesson for commercial parties: If you want to compel arbitration, you need to make sure that all of your contracts: (i) are with the appropriate parties, and (ii) contain appropriate mandatory arbitration language.

Schedule an Initial Consultation at Michael L. Feinstein, P.A.

Michael L. Feinstein, P.A. is a team of experienced business litigation lawyers who represent companies throughout South Florida. If you have questions about the enforceability of a mandatory arbitration clause, or if you need legal representation for a commercial dispute, call our Fort Lauderdale law offices at (954) 767-9662 or contact us online for an initial consultation.