By: Richard E. Guttentag, Esq., Stearns, Roberts & Guttentag, LLC
Arbitration of a dispute is only available pursuant to an agreement by the parties. The determination of whether an arbitration clause in a contract is valid and enforceable is based on basic contract interpretation principles. The case of Bari Builders, Inc. v. Hovstone Properties Florida, LLC, 2014 WL 3843070 (Fla. 4 th DCA 2014) addressed the issue of whether the presence of an additional dispute resolution clause in a contract would render the arbitration clause in the contract unenforceable.
In Bari Builders, Inc. v. Hovstone Properties Florida, LLC, a condominium developer filed a third-party complaint against its subcontractors arising out of alleged construction defects on a condominium project. One of the subcontractors moved to compel arbitration based on the arbitration provision in its subcontract with the developer, which provided in pertinent part:
“The parties hereto agree to binding Arbitration of any controversy or claim arising out of or relating to this contract, or the breach thereof . . . and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.”
However, the subcontract also contained language providing that: “IN ALL ACTIONS THE PARTIES WAIVE THE RIGHT TO JURY AND AGREE TO DETERMINATION OF ALL FACTS BY THE COURT.”
The developer opposed arbitration, arguing that the arbitration clause in the subcontract was unenforceable and that disputes under the subcontract must be resolved in court because the two clauses created an ambiguity as to whether arbitration was required. The trial court agreed with the developer, and denied the Subcontractor’s motion to compel arbitration.
Courts consider three elements in determining whether to compel arbitration of a dispute: (1) whether a valid written agreement to arbitrate exists; (2) whether an arbitrable issue exists: and (3) whether the right to arbitration was waived. In this case, the appellate court focused on whether a valid written agreement to arbitrate existed between the parties in determining whether to compel arbitration.
The court held that the jury waiver language in the subcontract did not render the arbitration provision ambiguous, and therefore the arbitration agreement was enforceable. The court explained that arbitration clauses are construed according to normal contract interpretation principles. Under the laws of contract interpretation, specifically the law favoring the enforcement of an arbitration provision, the presence of an additional dispute resolution clause does not render an otherwise valid arbitration clause ambiguous if the two can be read in a complementary fashion.
The court reasoned that read together, the provisions provide that the parties agree to submit any controversy or claim to arbitration, and thereafter, any award may be reduced to judgment in court without the right to a jury trial. Additionally, if the parties choose to waive their right to arbitrate, the clause provides that any “action” in court will be in the form of a non-jury trial. Therefore, the court ruled that the arbitration clause was enforceable, and the Subcontractor’s motion to compel arbitration must be granted.
This case demonstrates that arbitration clauses are construed according to basic contract interpretation principles, and the presence of an additional dispute resolution clause in a contract does not render an otherwise valid arbitration clause ambiguous, if the two clauses can be read together in a complimentary fashion.
About the Authors: Richard E. Guttentag is a partner with Stearns, Roberts & Guttentag, LLC, and is Board Certified in Construction Law by the Florida Bar. Mr. Guttentag concentrates his practice exclusively in construction law including construction lien claims and defense, payment and performance bond claims and defense, bid protests, construction contract preparation and negotiation, and construction and design defect claims and defense. He can be reached for consultation at [email protected].