Florida Court Finds that Arbitration Agreement Broadening Judicial Review Violates Florida Public Policy
In a lawsuit brought by a contractor against a subcontractor and its insurer, Florida’s Fourth District Court of Appeals found a provision in an arbitration agreement allowing for a broad ranging review of any arbitration award to be void as a matter of law and policy.
The subcontractor and insurer moved to compel arbitration under an agreement providing that on review of any award issued pursuant to that agreement, “the court shall be empowered to address on review any failure by the arbitrator(s) to properly apply Florida law to the dispute. To the extent the arbitrator(s) or the court fail to apply the law properly, the Award of the arbitrator(s) is subject to further review through the Florida appellate process.” This is, of course, a much broader judicial review than is normally permitted with respect to arbitration awards, and thus the contractor argued that the provision was void and that the entire arbitration agreement should be discarded.
The trial court granted the motion to compel arbitration, but the appellate court reversed, finding that the subject provision violated public policy as expressed in the Florida Arbitration Code. The Code limits a courts’ ability to vacate an arbitration award to a fairly narrow set of circumstances, such as when an arbitration award is “procured by corruption, fraud, or other undue means,” when there is “evident partiality,” corruption, or misconduct on the part of the arbitrator, or when the arbitrator exceeds the authority provided by the parties’ agreement. The Code also prohibits parties from waiving or agreeing to vary their right to seek judicial confirmation of awards or the grounds for vacating or modifying an arbitration award.
The court found that the Code clearly prohibited expansions of the scope of judicial review of arbitration awards and thus made the contested provision in the arbitration agreement unenforceable. Rather than finding that the arbitration agreement was unenforceable as a whole, however, the court remanded the matter to the trial court to determine whether this provision was severable, such that the arbitration agreement could be enforced with that provision removed.
National Millwork, Inc. v. ANF Group, Inc. and Liberty Mutual Insurance Company, No. 4D18-545 (4th DCA, Sep. 25, 2018)