Florida Court Rules #Arbitration Clause Applies Retroactively & Defers to Arbitrator to Rule on Validity of Agreement
A U.S. district court recently ruled in favor of a defendant employer on its motion to stay and compel a domestic arbitration pursuant to the Federal Arbitration Act (FAA). The plaintiff filed suit for overtime wages pursuant to the Fair Labor Standards Act (FLSA) on her own behalf and those similarly situated.
The Court addressed the following issues: whether the arbitration clause applied retroactively (it did); whether the clause was valid (a matter for the arbitrator to decide as explained below); whether inclusion of a prevailing party fee clause was unconscionable (it was not); whether the venue selected was unconscionable due to financial burdens on the plaintiff (it was not) and whether the legally unsubstantiated argument that the employer’s failure to provide a Spanish language translation of the document invalidated the arbitration clause (another issue for the arbitrator).
While each of these issues is dealt with in more detail in the opinion, two are particularly noteworthy and underscore the Florida district court’s pro-arbitration stance. The Court first articulated the FAA’s requirement that a valid, irrevocable and enforceable arbitration clause be upheld on proper showing that a written agreement which is otherwise enforceable under state-law contract standards exists and that the claims asserted fall within the scope of the agreement.
First, the plaintiff argued the agreement did not apply retroactively because it was signed after the claims arose (i.e. was outside the scope of the agreement). The Court reviewed the broadly drafted arbitration clause which did not have an effective date or temporal limitation but covered “services or work performed by Contractor” with respect to claims under “any contract” and determined the clause, as written, applied retroactively.
Second, the plaintiff challenged the validity of the agreement on several grounds. As a predicate matter, the Court noted that the agreement incorporated the Commercial Arbitration Rules of the AAA which expressly provide the arbitrator with power to rule on the arbitrator’s jurisdiction and to determine the validity of any arbitration agreement. As a result, the Court held “where an arbitration provision incorporates by reference the Commercial Arbitration Rules, federal courts decline to rule on challenges to the validity of the agreement.”
Notwithstanding the determination, the Court further reasoned that pursuant to current binding precedent “the Eleventh Circuit has held that the enforcement of collective action waivers in arbitration agreements is not inconsistent with the FLSA, and that arbitration agreements containing such waivers are enforceable under the FAA.” After rejecting or deferring the remaining issues to the arbitrator, the Court stayed the case and compelled arbitration.
The case is Donado v. MRC Express, Inc., Case No. 17-24032 (S.D. Fla. Jan. 4, 2018) and highlights the interplay of the FAA with the applicable rules of arbitration institutions.
Ava Borrasso FCIArb is the principal of Ava J Borrasso, P.A., a Miami-based law firm that concentrates on international commercial litigation and arbitration. She is a Fellow of the Chartered Institute of Arbitrators in international arbitration and a member of the panel of arbitrators of the International Centre for Dispute Resolution and the American Arbitration Association’s commercial panel. Earlier posts are available here.
