Arbitration & Mediation

Waiver of Arbitration is Not Cured by Plaintiff Amending or Transferring Case

By Christopher B. Hopkins, Esq.

When I print out a new case, I often flip through to see when the case law begins to get cited. No, I'm not rushing to the end like someone who reads the last page of a book first. It's more of a law school habit.

Court opinions set out the facts first and then the rule of law. A string of case names and citations on the page signals that the court has set the table of facts and precedent so that a feast of new law can be served.

Setting that table, however, can be a chore for the anxious lawyer. The faster the court can dispense with the specific facts of a case (which likely only interest the parties), the greater likelihood that the opinion will have wide application. Maybe to one of your pending cases. Having to state too many facts bogs down a clean, broad-reaching opinion.

With all respect to the parties and lawyers in Lawrence Strominger v. AmSouth Bank, the "when does the case law begin?" test proves that too many facts spoil a good opinion. The four and a half page opinion is just about half facts. Not bad, but the emerging rule is foggy and riddled with opportunities to distinguish. And, as far as precedent, a full reading of the case is probably not worth all the fuss.

But we can cut to the chase here.

In this consumer collection case, the plaintiff brought two lawsuits in the small claims division of county court and ultimately amended and transferred the cases into circuit court, essentially only changing the amount in controversy. Reading between the lines, the defendant figured it was cheaper to litigate in small claims court, no matter what the outcome, so the defendant didn't press the issue of the arbitration clause in the contract between the parties. When the plaintiff sought to amend/transfer, thus ramping up the value of the case, the defendant tried to switch from litigating to arbitrating by filing motions to compel arbitration. Was there waiver?

Well, let's review the case law in Florida. Despite a long precedent of favoring arbitration, the courts have developed a hair-trigger response by finding almost any act in court other than a motion to compel arbitration to be waiver. We've mentioned before, there is a clear opportunity for the courts to draw a bright line "waiver test" based upon the filing of an Answer. But this is not that case.

The Second District (Altenbernd, Casasnueva, and Stringer) picked up on the fact that, while there is no precise definition of active participation, there was also no precedent to put "active participation in litigation" back in the arbitration bottle. Saving a long procedural history, the defendant had filed an Answer (waiver!), undertaken discovery, and even sought summary judgment. As the court put it, "notwithstanding modest shifts in pleadings, strategy or evidence," active participation in litigation is waiver of arbitration.

Careful readers will enjoy the mysterious footnote three, a possible seedling of another appeal, which tempts future litigants with a wispy promise that "a major shift in legal theory or the revelation of earlier concealed evidence or some foundational change in litigation could warrant a basis for a party to demand arbitration...."

We are sympathetic to the defendant, which probably felt roped into a small court case only to end up with two circuit court cases. Arguably, this could become a tactic to lull defendants into litigating a small claims case (because arbitration would not be costworthy) and then file a motion to amend and transfer to circuit court once the trap of "active participation" has been sprung...

Full post as published by Florida Arbitration Law on October 15, 2008 (boomark / email).