In 1996, the American Arbitration Association received more than 4,000 requests to resolve construction-related disputes involving in excess of $900 million dollars.1 As construction industry groups continue to include arbitration provisions in their form documents, it is anticipated that the use of arbitration will continue to increase.2
Nationally, arbitration is recognized as an expedient, low cost mechanism to resolve construction disputes.3 Although gaining economy, informality, and privacy, those electing to arbitrate surrender the right to appeal which may ultimately lead to disaster.4Once a controversy arises, a party may opt to waive arbitration and pursue litigation. This alternative is advantageous when a legal defense asserted at an early pretrial hearing may dispose of the entire claim.
Construction practitioners seeking to reap the benefits of mandatory arbitration should be mindful of those activities that constitute an inadvertent waiver of this right. This article will explore the current state of the law regarding waiver of mandatory arbitration provisions. At the outset, the benefits and detriments of mandatory arbitration will be discussed to provide counsel with an overall perspective as to the arbitration process.
Benefits of Arbitration
It may be beneficial to pursue arbitration to resolve disputes in an economical, private, and confidential setting especially when proof may involve disclosure of trade secrets or bidding strategy and also, to avoid publicity based upon allegations of improper conduct.5Arbitration is often attractive to out-of-town litigants and “deep pocket” corporations seeking to avoid local judge or jury prejudice. Likewise, parties often prefer knowledgeable, qualified professionals ruling on issues involving confusing delay claims as opposed to fact finders unfamiliar with complex construction issues. As the formal rules of evidence do not apply, hearsay evidence is admissible and this often reduces the cost of the proceeding.6 Finally, parties often favor limited appellate rights associated with mandatory arbitration, recognizing that potential disputes will be resolved with finality.
Detriments of Arbitration
Parties elect to waive arbitration for a variety of reasons. First, legal issues may prompt a summary judgment in your favor which may resolve the entire case. Absent an agreement to the contrary, summary judgment is not available thereby requiring the arbitration panel to consider all evidence before rendering its award.
Second, limited rights of appeal exist from an arbitra-tion award. Generally, a right of appeal exists only for corruption, fraud, evidence of partiality or misconduct, exceeding jurisdiction, refusing to postpone a hearing for a good cause, or refusing to hear evidence.7 Recent decisions provide arbitrators with wide latitude relative to awarding punitive damages,8 attorneys’ fees,9 and determining liability based upon statutory racketeering claims.10 The sweeping decision-making power of an arbitration panel often creates high levels of anxiety among participants when an appointed arbitrator, as opposed to a judge or jury, will decide entitlement to an award of punitive damages when limited rights of appeal exist.
Third, as arbitration is a creature of contract,11 nonjoinder clauses often preclude other parties such as design pro-fessionals, subcontractors, engineers, and sureties from partici-pating in arbitration. Consequently, claims for indemnification or contribution against other responsible parties would require resolution by a separate proceeding as opposed to a single lawsuit.
Fourth, from a strategic standpoint, outspending the opposition through litigation where extensive, burdensome discovery is available may be preferred as opposed to arbitration.12 Considering congested court dockets, litigating a complex construction dispute coupled with the exercise of appellate rights could realistically consume the better part of a decade.
Fifth, when the stakes are high and your opposition is likely to encounter problems with proof, the rules of evidence will bar potential evidence from consideration by the fact finder.
Sixth, although viewed as expedient, loopholes exist in arbitration to frustrate the process and delay resolution. For example, a party may simply refuse to pay its share of arbitration fees resulting in a postponement.13
Finally, in Bowles Financial Group, Inc. v. Stifel, Nicolaus & Company, Inc., 22 F.3d 1010 (10th Cir. 1994), the Tenth Circuit U.S. Court of Appeals ruled that an offer of settlement disclosed during an arbitration proceeding will not serve as grounds to vacate an arbitration award. The court held that since the rules of evidence barring the admissibility of settlement negotiations do not apply to arbitration, arbitrators are free to decide what evidence should be considered.14 This decision highlights another pitfall associated with arbitration, namely that settlement offers may be introduced at arbitration unless precautionary measures are undertaken by counsel. As noted by the court, counsel would be derelict in advising a client to make a settlement offer knowing the offer may potentially be communicated to the arbitrators.15
Based upon the potential adverse impact associated with the intentional or inadvertent waiver of arbitration, any action that may constitute a waiver of a party’s right to arbitration must be avoided. Should a waiver occur, the benefits of arbitration may be forever lost.
By initiating litigation, a party waives its right to arbitration.16 Upon being served with a lawsuit, a party seeking to enforce its right to arbitrate should promptly file a motion to compel arbitration and stay litigation17 or a motion to dismiss.18 Generally motions to compel arbitration require at least three elements to be alleged:19a valid agreement requiring arbitration; the existence of arbitrable issues; and the absence of any waiver of the right to arbitrate.
• Valid Agreement to Arbitrate20
The right to arbitration exists only where a valid agreement demonstrates that the parties intended to arbitrate a dispute.21 In certain circumstances, however, a party may still be required to arbitrate notwithstanding a failure to execute an agreement containing an arbitration clause.22 Generally, several theories exist to require a nonsignatory to arbitrate including agency,23 veil piercing,24estoppel25 and, most importantly, incorporation by reference.26
In a construction context, the use of prime contract form documents from the American Institute of Architects (AIA) between the owner and general contractor often results in the use of companion AIA documents between the general contractor and its subcontractors.27 When parties specifically agree to incorporate the prime agreement into their own contract, subcontractors become bound by the arbitration clause contained in the prime agreement.28 Based upon these principles, when an AIA form construction contract references the AIA Document A201 “General Conditions of Contract for Construction” (which includes an arbitration clause), AIA Document A201 will be incorporated by reference into the construction contract and the parties will be obligated to arbitrate.29
There is also authority, however, that an arbitration clause will not be incorporated by reference when it represents an extraneous part of the documents being incorporated. In Omega Construction Co., Inc. v. Altman, 382 N.W.2d 839 (Mich. Ct. App. 1985), the contract stated that it was “being signed based upon plans and drawings prepared by the Architect.” The plans and specifications were contained in a “project manual” with the title page signed by the parties. The project manual stated that the AIA Document 201 “General Conditions Of Contract For Construction” (which require arbitration) were part of the specifications. A dispute arose when the defendants claimed it never intended for contract disputes to be arbitrated. The court held that an arbitration agreement could not be incorporated by reference unless the contract contained clear and unambiguous language to demonstrate that the parties intended to arbitrate.30 On the other hand, a construction surety was held to be bound by arbitration when its performance bond incorporated by reference the arbitration provisions of the subcontract.31
• Arbitrable Issues
Strong judicial policy requires the scope of an arbitration clause to be liberally construed in favor of arbitration.32 A clause providing that “all controversies and claims arising out of or relating to the agreement or the breach thereof shall be settled by arbitration” will be broadly interpreted to encompass a variety of claims including fraud and fraud in the inducement.33 Additionally, issues once traditionally reserved for a judge or jury are now, within the scope of the arbitrator’s power, including the award of punitive damages34 and attorneys’ fees.35 However, courts will not require arbitration where an agreement indicates that the parties did not intend that certain issues be resolved by arbitration.36
• What Constitutes Waiver?
A party moving to compel arbitration must also demonstrate that it did not waive its right to arbitrate. The test to determine if a party has waived its right to arbitrate generally consists of three elements.37 The first element is whether a moving party had knowledge of the existence of the right to arbitrate.38 The second element is whether a party has undertaken some act that was inconsistent with the right to arbitrate.39 Courts have held that this act may occur prior to or after commence—ment of litigation.40 The third element is whether an inconsistent act caused prejudice to the nonmoving party.41
1) Knowledge of the Existing Right to Arbitrate
Contract law generally provides that a party cannot waive a right without first knowing that such a right exists.42 A party to a contract is presumed to have knowledge of its content.43 As noted above, arbitration clauses may be set forth in a separate document that is incorporated by reference but not actually provided to each party at the time of contracting.44
In Marthame Sanders & Co. v. 400 West Madison Corp., 401 So. 2d 1145 (Fla. 4th DCA 1981), the parties executed a construction contract and specifically initialed the title page which contained a reference to the general conditions. The plaintiff filed a lawsuit and attached a copy of the contract to its complaint. The defendant filed its answer and counterclaim. After proceeding with discovery, including depositions, interroga-tories, and document productions, the defendant moved to compel arbitration. Based upon these events, the court held that the defendant’s participation in the litigation constituted an abandonment of its right to arbitration.45Moreover, the court held that lack of knowledge as to the existence of the arbitration clause was not a defense because the parties signed and initialed the contract containing the reference to the arbitration clause.46
In a nonconstruction setting, the Fourth District Court of Appeal in Breckenridge v. Farber, 640 So. 2d 208 (Fla. 4th DCA 1994), held that a stockbroker had knowledge of an arbitration provision included in documents furnished by the brokerage company to its clients. Under the circumstances, the broker was required to participate in arbitration. In reaching this conclusion, the court recognized that arbitration clauses were standard in the industry and, therefore, the broker should have anticipated that any dispute would be subject to arbitration.47
The foregoing decision suggests that construction industry practitioners conduct an early and diligent search to ascertain whether an arbitration clause exists. The search becomes particularly crucial when a client is part of the construc-tion industry, where arbitration provisions are common place.48
2) Inconsistent Acts
The Fifth Circuit Court of Appeals in Valero Refinery, Inc. v. M/T Lauberhorn, 813 F.2d 60, 65 (5th Cir. 1987), has held that “there is no settled rule as to what act or omission constitutes a waiver of an agreement to arbitrate.”49 The court held that the “question of waiver depends on the circumstances of each case and usually must be determined by the trier of fact.”50 Activity that indicates an intent to repudiate the right to arbitrate could occur before or after litigation is filed. Although courts have not yet espoused a litmus test to determine when a waiver occurs generally, the waiving party must act inconsistently with the right to arbitrate. For example, participating in a lawsuit without seeking arbitration, constitutes conduct that is inconsistent with pursing arbitration.51
In Gilmore v. Shearson/American Express, Inc., 811 F.2d 108 (2d Cir. 1987), the defendant withdrew its motion to compel arbitration. Under these circumstances, the court held that this conduct expressly waived the right to arbitrate. Similarly, express waiver has been found where arbitration was sought after the parties successfully resisted a motion to compel arbitration.52 Further, the right to arbitration has been deemed waived when a party seeks to reap the benefits of formal discovery prior to filing a motion to compel arbitration.53
Following the lead of the U.S. Arbitration Code, federal courts require a showing of prejudice before waiver will be found to exist.54On the other hand, in some jurisdictions the party opposing arbitration need not demonstrate actual prejudice, unless waiver is premised on delay in asserting the right.55 A conflict between state and federal law may also confuse practitioners, as highlighted by Donald & Company Securities, Inc. v. Mid-Florida Community Services, Inc., 620 So. 2d 192 (Fla. 2d DCA 1993).
In Donald & Company, the court held that a party could waive arbitration by actively participating in a lawsuit or by taking action inconsistent with the right to arbitrate. This principle will be enforced even in the absence of prejudice to another party. Applying federal substantive law under the U.S. Arbitration Act requires a showing of prejudice before the right to arbitrate is deemed to be waived. The court emphasized that prejudice had occurred because the party seeking arbitration had sought discovery from several defendants and had engaged in active litigation for more than a year.56
Donald & Company cited S & H Contractors, Inc. v. A.J. Taft Co., Inc.,57 as federal authority to require prejudice as a necessary element, before arbitration will be waived. However in S&H Contractors, prejudice was found to exist as a matter of law by virtue of a party’s active participation in a lawsuit. The above-referenced decisions emphasize the risk associated with initiating any action that may be interpreted as participation in a lawsuit.
Arbitration continues to serve as the most popular forum for resolving construction-related disputes. This trend is evident by the widespread practice of the construction industry to use form documents that require arbitration. As mandatory arbitration clauses enjoy sweeping popularity within the construction industry, the benefits and detriments of arbitration must be evaluated. Arbitration can save clients both time and money, however, limited rights of appeal coupled with the expanding authority of arbitrators to decide entitlement to an award of punitive damages and attorneys’ fees require careful consideration. On this score, construction practitioners must be mindful of the implications associated with waiving a client’s right to arbitrate. Likewise, prompt action must be initiated to preserve the right to arbitrate when an opposing party seeks to avoid arbitration by initiating litigation.
A consensus of national case law suggests that a party raise the right to arbitrate as quickly as possible to preserve this right. Initiating litigation or engaging in litigation activity may be deemed “participation in the lawsuit” or be otherwise interpreted as being “inconsistent with the right to arbitrate.” By recognizing the benefits and detriments of arbitration, construction litigators will be best equipped to resolve disputes for their construction industry clients. q
1 American Arbitration Association, “Construction Arbitration and Mediation Case Report,” Jan. 1996-Dec. 1996.
2 American Institute of Architects (“AIA”) documents A101, A107, A191 and A201, the Engineer’s Joint Contract Documents Committee (“EJCDC”), Associated General Contractors (“AGC”), American Subcontractors Association (“ASA”), Associated General Contractors (“AGC”) ,as well as the National Society of Professional Engineers (“NSPE”) forms all contain mandatory arbitration provisions. It has been reported that the 1997 version of the AIA Document 201 will continue to include an arbitration provision along with a mediation component. See Howard G. Goldberg, “AIA Document A:201 General Conditions For Construction—Consideration For Change,” 35th Annual Meeting of Invited Attorneys (Hilton Head, S.C., May 30-June 1, 1996).
3 Michael Segalla, Survey: The Speed and Cost of Complex Commercial Arbitrations, Arb. J. (Dec. 1991).
4 Davis v. Prudential Securities, Inc., 59 F.3d 1186 (11th Cir. 1995). Limited grounds for vacating an arbitration award are set forth in the federal Arbitration Act, 9 U.S.C. §9. As discussed throughout this article, the broad powers of arbitrators to award punitive damages and attorneys’ fees coupled with limited rights of appeal may produce disastrous results. An arbitration disaster was described in the Georgia case Hundley v. Green, 461 S.E.2d 250 (Ga. App. 1995). In Hundley, the homeowners alleged that its general contractor charged excessive fees and constructed their renovated home with significant deficiencies. The contractor charged the homeowners for the cost of 9,000 bricks and 400 pieces of lumber that were never installed. This evidence was not refuted by the contractor. Additionally, it was alleged that the contractor committed other improprieties such as double billing for footings and applying paint over mildewed siding. Notwithstanding the evidence, the arbitrator found in favor of the general contractor and two independent contractors who were not even parties to the arbitration and did not participate in it. To make matters worse, the arbitrator found that the general contractor did not breach the contract and awarded damages to the general contractor in excess of the guaranteed maximum contract price.
The homeowners sought to vacate the award and the trial court found no indication of fraud, partiality, or lack of authority to justify vacating the award. On appeal, the court reversed indicating that the arbitrator’s factual findings were so contrary to the evidence that the court was entitled to vacate the arbitration award. The Hundley decision highlights the danger of arbitration when limited rights of appeal exist. For the most part, a successful appeal of an arbitration award based upon evidentiary grounds is extremely rare. But for the persistence of the homeowner in Hundley, an award completely contrary to the evidence would have been entered.
5 Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974); Deloitte Noraudit A/S v. Deloitte Haskins & Sells, U.S., 9 F.3d 1060 (2d Cir. 1993); McKenna v. Shearson Lehman Hutton, Inc., 592 A.2d 980 (Conn. App. 1991).
6 Davis v. Prudential Securities, Inc., 59 F.3d 1186, 1190 (11th Cir. 1995); Lee v. Chica, 983 F.2d 883, 889 (8th Cir.), cert. denied, 510 U.S. 906 (1983); Farkas v. Receivable Financing Corp., 806 F. Supp. 84 (E.D.Va. 1992); see also 9 U.S.C. §7 and American Arbitration Association Construction Industry Arbitration Rules, R-31 “Evidence” (Apr. 1, 1996).
7 Davis v. Prudential Securities, Inc., 59 F.3d 1186 (11th Cir. 1995); Hundley v. Greene, 461 S.E.2d 250 (Ga. App. 1995); 9 U.S.C. §§9 and 10. See also, Davison v. Henson, No. 19848-7-II (Wash. App. Feb 21, 1997) (arbitration award in favor of contractor affirmed when after award it was discovered that the contractor was unlicensed. The court reasoned that reopening the hearing was not justified since legal error did not appear on the face of the award).
8 Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52 (1995); Davis v. Prudential Security, Inc., 59 F.3d 1186 (11th Cir. 1995); Bonar v. Dean Witter Reynolds, Inc., 835 F.2d 1378 (11th Cir. 1989); cf. Garrity v. Lyle Stuart, Inc., 386 N.Y.S.2d 831, 353 N.E.2d 793 (1976).
9 Turnberry Assocs. v. Service Station Aid, 651 So. 2d 1173 (Fla. 1995) (holding that the parties can agree to waive their entitlement to have the circuit court decide the issue of attorneys’ fees); Prudential-Bache Securities, Inc. v. Depew, 814 F. Supp. 1081 (M.D. Fla. 1993); Todd Shipyards Corp. v. Cunard Line, Ltd., 943 F.2d 1056 (4th Cir. 1991); Chapman v. Arthur Murray Int’l., Inc., 652 F. Supp. 73 (S.D. Fla. 1986); Fla. Stat. §682.11 (1995).
10 Shearson/American Express, Inc. v. McMahon, 482 U.S. 220 (1987).
11 See infra note 38.
12 Discovery is limited in an arbitration setting. Harry W.R. Chamberlain II, Business Organizations And Insurance Companies Can Arbitrate Anything But Do They Really Want To? 31 Tort & Ins. L.J. 960 (summer 1996); see note 76 of the Chamberlain article which cites Anthony Aarons, Developer gets $47 million in AAA Arbitration, L.A. Daily J., Oct. 9, 1995, at 1 (Construction Arbitration spanning 5 years that included 226 days of testimony, resulting in $47 million compensatory damage award in favor of owner). One must question whether this proceeding was ultimately less expensive than a jury trial; 9 U.S.C. §7; American Arbitration Association International Rules, Art. 20 (1992).
13 See American Arbitration Association Construction Industry Arbitration Rules (Apr. 1, 1996). The section entitled “Suspension For Nonpayment” provides that if payments are not made “[t]he tribunal may order the suspension or termination of the proceedings.”
14 Bowles, 22 F.3d at 1011.
15 The Bowles court noted in its conclusion that “The result of this opinion may well be to encourage counsel to communicate asettlement offer to arbitrators. This opinion might also encourage counsel to communicate other evidence to arbitrators which a Court would regard as highly improper. This is for the parties to arbitration to decide and control as arbitration is possible only if the parties agree to arbitrate and how to arbitrate.” Id. at 1014. The author recommends that parties to arbitration proceedings be mindful that settlement negotiations may be admissible. Prior to an exchange of settlement offers, it is recommended that a written stipulation be executed by the parties to confirm the confidentiality of any and all settlement negotiations. Furthermore, the stipulation should include a provision to award damages against a party that discloses the nature and extent of any settlement negotiations to the arbitrator.
16 Bonner v. RCC Associates, Inc., 679 So. 2d 794 (Fla. 3d D.C.A. 1996); Place St. Charles v. J.A. Jones Construction Co., 823 F.2d 120 (5th Cir. 1987).
17 See Fla. Stat. §682.03 (1995); 9 U.S.C. §§3 and 12; Hough v. JKP Development, Inc., 654 So. 2d 1241 (Fla. 3d D.C.A. 1995).
18 Gale Group, Inc. v. Westinghouse Electric Corp., 683 So. 2d 661 (Fla. 5th D.C.A. 1996); Fla. Stat. §682.03 (1995); see also, 9 U.S.C. §4.
19 Gale Group, Inc. v. Westinghouse Electric Corp., 683 So. 2d 661 (Fla. 5th D.C.A. 1996).
20 In some jurisdictions, parties may be required to arbitrate absent an executed arbitration agreement based on traditional principles of contract law. See infra notes 24-28.
21 Road Sprinkler Fitters Local Union No. 669 v. Independent Sprinkler Corp., 10 F.3d 1563 (11th Cir. 1994); Bonner v. RCC Associates, Inc., 679 So. 2d 794 (Fla. 3d D.C.A. 1996); Diskin v. J.B. Stevens & Co., Inc., 836 F.2d 47 (1st Cir. 1987), aff’d, 893 F.2d 1327 (1989).
22 Valero Refining, Inc. v. M/T Lauberhorn, 813 F.2d 60 (5th Cir. 1987); Letizia v. Prudential Bache Securities, Inc., 802 F.2d 1185 (9th Cir. 1986); First Citizens Municipal Corp. v. Pershing Division of Donaldson Luffkin and Genret Securities Corp., 546 F. Supp. 884 (N.D. Ga. 1982); Marthame Sanders & Co. v. 400 West Madison Corp., 401 So. 2d 1145 (Fla. 4th D.C.A. 1981); McAllister Brothers, Inc. v. A&S Transportation Co., 621 F.2d 519 (2nd Cir. 1980).
23 In re Arbitration between Keystone Shipping and Texport Oil Co., 782 F. Supp. 28 (S.D.N.Y. 1992); Carolina Throwing Co. v. S & E Novelty Corp., 442 F.2d 329 (4th Cir. 1971).
24 In re Arbitration between Keystone Shipping and Texport Oil Co., 782 F. Supp. 28 (S.D.N.Y. 1992); Interocean Shipping Co. v. National Shipping & Trading Co., 523 F.2d 527 (2nd Cir. 1975), cert. denied, 423 U.S. 1054 (1976).
25 Deloitte Noraudit A/S v. Deloitte, Haskins & Sells, U.S., 9 F.3d 1060 (2d Cir. 1993).
26 Lord & Son Construction, Inc. v. Roberts Electrical Contractors, Inc., 624 So. 2d 376 (Fla. 1st D.C.A. 1993); USF&G v. Westpoint Construction Co., Inc., 837 F.2d 1507 (11th Cir. 1988).
27 For example, AIA Document 101 incorporates AIA Document 201, General Conditions of the Contract for Construction (1987).
28 Commercial Union Ins. Co. v. Gilbane Building Co., 992 F.2d 386 (1st Cir. 1993); Dynalectric Co. v. Westinghouse Electric Corp., 803 F. Supp. 985 (D.N.J. 1992); U.S. Fidelity & Guar. Co. v. West Point Constr. Co., 837 F.2d 1507 (11th Cir. 1988).
29 See Paragraph 4.5.1 of the AIA Document 201 and O.B.S. Co., Inc. v. Pace Construction Company, 558 So. 2d 404, 406 (Fla. 1990), which espoused the general rule of contract law that “where a writing expressly refers to and sufficiently describes another document, the other document is to be interpreted as part of the writing.”
30 Omega Construction, 382 N.W.2d at 841. See, Hills Pet Nunecian, Inc. v. Fur-Lon Construction, 101 F.3d 63 (7th Cir. 1996). The Seventh Circuit Court of Appeals held that although the parties agreed to an arbitration clause, the scope of that clause could not bind a party to arbitrate a dispute over terms not yet agreed to by the parties. St. Augustine Pools, Inc. v. James A. Barker, Inc., 687 So. 2d 957 (Fla. 5th D.C.A. 1997) (subcontractor precluded from arbitrating a dispute with general contractor. The contract between owner and general contractor, included an arbitration clause, however, the subcontract did not incorporate by reference the arbitration clause).
31 Von Engineering Co. v. R.W. Roberts Construction Co., Inc., 457 So. 2d 1080 (Fla. 5th D.C.A. 1984). Similarly, consider the recent decision of Southwest Florida Retirement Center, Inc. v. Federal Insurance Co., 682 So. 2d 1130 (Fla. 2d D.C.A. 1996) where a surety’s liability, by incorporating the prime contract into the performance bond becomes co-extensive with its principal for latent construction defects.
32 Moses H. Cohen Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 5 (1983); Jansen Properties of Florida, Inc. v. Real Estate Associates, Ltd. VI, 674 So. 2d 210 (Fla. 4th D.C.A. 1996); In re Complaint of Hornbeck Offshore (1984) Corp. v. Coastal Carriers Corp., 981 F.2d 752 (5th Cir. 1993); Wylie v. Investment Management & Research, Inc., 629 So. 2d 898, 901 (Fla. 4th D.C.A. 1993). Harry W.R. Chamberlain II, Business Organizations And Insurance Companies Can Arbitrate Anything But Do They Really Want To?, 31 Tort & Ins. L.J. 960 (summer 1996); see also, AIA Document 201 General Conditions to Contract for Construction, paragraph 4.1.5.
33 Prima Paint Corp. v. Flood & Conklin Mfg., Co., 388 U.S. 395 (1967); H.S. Gregory v. Electro-Mechanical Corp., 83 F.3d 382 (11th Cir. 1996)
34 Mastrobuno v. Shearson Lehman Hutton, Inc., 514 U.S. 52 (1995); Creative Tile Marketing, Inc. v. SICIS International, s.r.l., 922 F. Supp. 1534 (S.D. Fla. 1996); Seaboard Coast Line Railroad v. Trailer Train Co., 690 F.2d 1343 (11th Cir. 1981); see also 9 U.S.C. §4.
35 See supra note 9.
36 Recently, Florida’s Fourth District Court of Appeal in Federal Vending, Inc. v. Steak & Ale of Florida, Inc. d/b/a Bennigan’s, Inc., 687 So. 2d 1366 (Fla. 4th D.C.A. 1997), held that obtaining a provisional remedy such as injunctive relief was not encompassed by the arbitration clause. The court upheld the contractual right to seek a judicial remedy notwithstanding the existence of an arbitration clause. See also, Amour & More North American Licensing, Inc. v. Zammatta, 659 So. 2d 1387, 1388 (Fla. 3d D.C.A. 1995) (Defendant did not waive its right to arbitration where the right exists to enforce a note which was expressly outside the scope of the arbitration clause). Insignia Homes, Inc. v. Robert Hinden, 675 So. 2d 673 (Fla. 4th D.C.A. 1996) (holding that the arbitration clause specifically excluded claims of lien by the contractor); Florida Dep’t of Ins. v. World Re, Inc., 615 So. 2d 267 (Fla. 5th D.C.A. 1993); Marschell v. Dean Witter Reynolds, 609 So. 2d 718 (Fla. 2d D.C.A. 1992); see also, Blue Gray Corporations I and II v. Merrill Lynch Pierce Fenner & Smith, 921 F.2d 267 (11th Cir. 1991) (finding parties can limit the scope of disputes which would be subject to arbitration).
37 The requirement that there be prejudice to the non-moving party is not followed in all jurisdictions. See infra note 55.
38 Marthame Sanders & Co. v. 400 West Madison Corp., 401 So. 2d 1145 (Fla. 4th D.C.A. 1981).
39 See infra note 53.
40 Merrill Lynch, Pierce Fenner & Smith, Inc. v. Green, 936 F. Supp. 942 (S.D. Fla. 1996).
41 See infra notes 56 and 57.
42 Arbitration is a creature of contract and therefore, contract provisions apply. Blue Gray Corporations v. Merrill Lynch, 921 F.2d 267 (11th Cir. 1991); Goldberg v. Bear Sterns & Co., 912 F.2d 1418 (11th Cir. 1990); Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974).
43 Marthame Sanders & Co. v. 400 West Madison Corp., 401 So. 2d 1145 (Fla. 4th D.C.A. 1981).
44 See supra note 26. As construction practitioners have experienced, parties to an AIA form Construction Contract Document may frequently not be provided with a copy of AIA 201 General Conditions of the Contract for Construction upon execution of the Construction Contract.
45 The opinion does not specify which forms were used.
46 Again, the opinion is not clear as to whether defendant ever possessed a copy of the general conditions. The only direct implication is that a copy was not attached to the complaint.
47 The Breckenridge decision is also noteworthy because the stockbroker was not a party to the document that contained the arbitration clause. These documents were furnished from the brokerage company to the client in order to open an account. The broker claimed it had no personal knowledge that the documents contained an arbitration clause. After filing at least four motions to dismiss without any reference to arbitration, the broker’s lawyers sought copies of all documents between the client and the brokerage house. A copy of the documents containing the arbitration clause was purportedly illegible. Apparently, while preparing for trial, the broker discovered that the arbitration provision existed the first time. Although the trial court granted the last minute request for arbitration by the broker, it was later reversed by the appellate court.
48 See supra notes 1-3.
49 Valero Refinery, 813 F.2d at 65; see also Shifel Nicolaus & Co. v. Freeman, 924 F.2d 157 (8th Cir. 1991).
50 Valero Refinery, 813 F.2d at 65.
51 O’Flarity v. Trend Star Development, Inc., 689 So. 2d 1297 (Fla. 4th D.C.A. 1997) (filing of an answer is inconsistent with a later demand for arbitration and waives that right); Beverly Hills v. George Wimpey of Florida, Inc., 661 So. 2d 969 (Fla. 5th D.C.A. 1995); Bared and Co. v. Specialty Maintenance, 610 So. 2d 1 (Fla. 2d D.C.A. 1992); Pozen v. Shearson Leiman Brothers, 534 So. 2d 1185 (Fla. 3d D.C.A. 1988); rev. denied., 544 So. 2d 200 (Fla. 1989).
52 Smith v. Petrou, 705 F. Supp. 183 (S.D.N.Y. 1989)
53 Preferred Mutual Insurance Co. v. Matrix Construction Corp., 662 So. 2d 432 (Fla. 3d D.C.A. 1995).
54 Rush v. Oppenheimer & Co., 779 F.2d 885 (2d Cir. 1985); Demsey & Associates, Inc. v. S.S. Sea Star, 461 F.2d 1009 (2d Cir. 1972)
55 Beverly Hills v. George Wimpey of Florida, Inc., 661 So. 2d 969 (Fla. 5th D.C.A. 1995); Rosen v. Shearson Lehman Brothers, Inc., 534 So. 2d 1185 (Fla. 3d D.C.A. 1989), rev. denied, 544 So. 2d 200 (Fla. 1989); National Foundation for Cancer Research v. A.G. Edwards and Sons, 821 F.2d 772 (D.C. Cir. 1987).
56 Id. Lake Communications, Inc. v. ICC Corp., 738 F.2d 1473, 1477 (9th Cir. 1984) (party opposing arbitration has the burden to demonstrate prejudice resulting from delay in requesting arbitration).
57 S & H Contractors, Inc. v. A.J. Taft Coal Co., Inc., 906 F.2d 1507 (11th Cir.), cert. denied, 498 U.S. 1026 (1991).
Steven B. Lesser is a shareholder with the law firm of Becker & Poliakoff, P.A., in Ft. Lauderdale. He concentrates his practice on construction matters and is past chair of the Broward County Bar Association’s Construction Law Committee. He has published numerous articles relating to construction and recently co-authored a chapter on construction defect litigation forThe Florida Bar’s practice manual, Florida Condominium Law and Practice.
The author gratefully acknowledges the assistance of Kevin M. Levy of Becker & Poliakoff, P.A., and David H. Reimer of Biscayne Insurance Company for their assistance in preparing this article.