By Judge David M. Gersten, Litigation Partner
Visiting Nurse Association of Florida, Inc. v. Jupiter Medical Center, Inc., 39 Fla. L. Weekly S503
At the outset, I advise the reader that I dislike arbitration. I dislike arbitration because after over 22 years as an appellate judge, I saw injustice after injustice occur in arbitration cases that I could not fix as a law judge. At oral argument, I have asked many a lawyer, “What do you want me to do about it?” That said, I also have a bias toward judges following the law. In Visiting Nurse Association, Justice Labarga, writing for a unanimous Florida Supreme Court, completely followed the law.
Trial and Appellate Court History
In the trial court, Judge David French refused to vacate the arbitrator’s award based on an alleged illegal contract, dismissed the action, and ordered enforcement of the arbitration award. Thus, in spite of allegations that the contract violated state and federal laws, regulations and rules that would result in civil and criminal penalties, the trial judge followed the contractual arbitration provision. That provision stated, in relevant part, that the arbitration panel is to decide, “[a]ny dispute, controversy or claim arising out of or related to this Agreement or the breach hereof.”
On appeal, the 4th DCA’s unanimous decision stated that once “a contract’s legality is raised,” the trial court “must” determine the legality of the contract before enforcing the arbitration award based on the contract. Consequently, the 4th DCA reversed. Jupiter Medical Center, Inc., v. Visiting Nurse Ass’n of Florida, Inc., 72 So. 3d 184 (Fla. 4th DCA 2011).
It is clear that the 4th DCA bristled at the concept of a court enforcing arbitration under an illegal contract. In fact, I think it fair to state that it would upset any judge’s sense of justice to enforce any provision of an illegal contract. It does not feel right. After all, I suspect that most judges will protect the public from illegal contracts even when statutes do not. So, I understand completely where the 4th DCA was coming from enforcing justice and doing the right thing.
Apparently, however, when the 4th DCA decided to do the right thing by making the trial court first determine if a contract was illegal, it did so in direct conflict with the 5th DCA’s decision in Commercial Interiors Corp. of Boca Raton v. Pinkerton & Laws, Inc., 19 So. 3d 1062 (Fla. 5th DCA 2009). This is not to suggest that the 5th DCA did the wrong thing. Actually, the 5th DCA also did the right thing by following the law. So, because of the conflict between equitable principles and the rule of law, this set up the perfect storm for Supreme Court conflict jurisdiction under Article V, Section 3(b)(3), of the Florida Constitution.
The Court Analyzes U.S. Law and U.S. Supreme Court Precedent
After reciting the facts of the conflicting appellate court cases, Justice Labarga’s analysis reminds us of the stylistic approach that Justice Scalia uses in his opinion writing: Tell the reader about the historical underpinning of the relevant law. In this respect, Justice Labarga’s opinion starts at the beginning: 9 U.S.C., the Federal Arbitration Act (FAA) and Florida’s counterpart, the Florida Arbitration Code (FAC). Thereafter, he briefly takes the reader to the Interstate Commerce Clause to explain how the FAC applies in contracts involving the Interstate Commerce Clause, to the extent that the FAC is not in conflict with the FAA (preemption becomes the polestar).
The opinion then performs a cogent analysis and review of the U.S. Supreme Court opinions that elevate the FAA and contractual arbitration to the highest degree of contractual rights. Of the many case citations, the recent salient U.S. Supreme Court cases that the opinion cites are: Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006); Hall St. Assocs., L.L. C., v. Mattel, Inc, 552 U.S. (2008); Stolt-Nielsen S.A. v. Animalfeeds Int’l Corp., 129 S.Ct. 2793 (2009) and Oxford Health Plans LLC v. Sutter, 133 S.Ct. 2064 (2013).
The opinion then juxtaposes the FAA with the FAC and determined that under either the FAC or the FAA, there are no statutory grounds for the trial court to vacate the arbitration award due to an illegal contract. In fact, the opinion notes that under either the FAA or the FAC, the “illegality” of the contract is not a recognized legislative ground for vacating an arbitration award. Thus, the arbitration panel, rather than a law court, has the authority to decide the issue because it arises out of the agreement.
Rules of Contractual Arbitration for Lawyers and Judges
The opinion clearly gives lawyers and judges more than a succinct history of contractual arbitration cases; it gives us simple rules. Those rules can be summarized for the busy reader:
1) An arbitration provision is severable from the contract.
2) Without a challenge to the arbitration provision, the arbitrator construes the contract.
3) Arbitration law applies in state and federal courts.
4) There are no judicial exceptions to vacate arbitration awards in the statutory framework.
Follow Justice Or Follow Law?
Thematically writing, there exists a fundamental jurisprudential yin/yang: Should judges follow the law or justice, if law and justice do not intersect?
In this case, we see that the trial judge applied the law. Yet, at the appellate level, we see that three judges applied justice. But, at the highest state judicial level, we see that seven justices applied the law.
Getting back to why I dislike arbitration under current law: If the courts had more authority to review arbitration awards, then we could take great comfort in some meaningful law court review process. Without the law court review process, parties are left to the vagaries and vicissitudes of the arbitration process.
This is not to suggest that arbitrators are bad people or that arbitration is an unfair process. Clearly, it is often efficient and conducted by right-minded people. Yet, arbitrators are not bound by the Judicial Canons. Those Canons are the guiding principles for judges; judges take them seriously. The problem becomes exacerbated by the fact that arbitrators are not bound by case law or the rules of evidence. So, a meaningful review by judges bound by these Canons, case law and rules of evidence would give the public better safeguards from an errant, though authorized, arbitration award.
Yet, we all expect our judiciary to follow the law. In Visiting Nurse Association, the Supreme Court absolutely followed the law.
This article was first published on the Law.com Network on August 01, 2014.