Florida Second DCA Challenges Status Quo On Delegation of Arbitrability Under The Federal Arbitration Act
By: Allan A. Joseph, Esq.
On March 25, 2020, Florida’s Second District Court of Appeal issued its panel decision in Doe v. Natt, 2D19-1383, 2020 WL 1486926 (Fla. 2d DCA Mar. 25, 2020). A copy of the decision is available here.
The facts of the case are as astonishing as its holding.
A Texas couple sued Airbnb in Florida state court after learning that they had been videotaped by a voyeuristic host who had installed hidden cameras in his Longboat Key vacation condominium.
Airbnb moved to compel arbitration.
The arbitration agreement provided for arbitration in accordance with the Rules of the American Arbitration Association and that the Federal Arbitration Act would govern its interpretation.
The trial court ruled that it “the issue of arbitrability had to be decided by the arbitrator, not the court.” Natt, 2020 WL 1486926*2.
The issue before the Second DCA in Natt was whether the mere reference to the AAA Rules was “clear and unmistakable” evidence that the Does intended to delegate the issue to the arbitration panel. See, e.g., Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 70 (2010) (“An agreement to arbitrate a gateway issue is simply an additional, antecedent agreement the party seeking arbitration asks the federal court to enforce, and the FAA operates on this additional arbitration agreement just as it does on any other.”).
The Second DCA held, in a well-reasoned opinion by Judge Matthew Lucas, that merely referencing the AAA Rules is not sufficiently clear evidence that the parties intended to delegate arbitrability and thus the Court remained the presumptive gatekeeper to determine whether the Does’ claims against Airbnb were arbitrable:
[The AAA Rules] were referenced in the click wrap agreement as a generic body of procedural rules, and that reference was limited to how “the arbitration” was supposed to be “administered.” Plainly, the agreement’s reference to the AAA Rules … addresses an arbitration that is actually commenced. In other words, the directive is necessarily conditional on there being an arbitration. If a claim is arbitrated, then the AAA Rules apply. But if the question were put, “Who should decide if this dispute is even subject to arbitration under this contract?” to respond, “The arbitration will be administered by the American Arbitration Association (‘AAA’) in accordance with the Commercial Arbitration Rules and the Supplementary Procedures for Consumer Related Disputes,” is not a very helpful answer and not at all clear.
Natt, 2020 WL 1486926, at *7.
Natt therefore holds that merely making reference to the AAA rules, even Rule 7(a), is insufficient to “clearly and unmistakably” prove delegation. Natt, 2020 WL 1486926, at *7 (“’[Rule7(a)] merely states that the arbitrator shall have ‘the power’ to determine issues of its own jurisdiction …. This tells the reader almost nothing, since a court also has the power to decide such issues, and nothing in the AAA rules states that the AAA arbitrator, as opposed to the court, shall determine those threshold issues, or has exclusive authority to do so.”’) (citation omitted).
Judge Lucas acknowledges that the decision “may constitute something of an outlier in the jurisprudence of [the FAA].” Natt, 2020 WL 1486926, at *8. In this regard, he is referring, among other prior cases, to Terminix Intern. Co., LP v. Palmer Ranch Ltd. P’ship, 432 F.3d 1327, 1332 (11th Cir. 2005), and its progeny, which hold that agreeing to arbitrate under the AAA Rules is “sufficiently clear and unmistakable” evidence of delegation.
Collectively, [Terminix; U.S. Nutraceuticals; and Spirit Airlines] dictate that by incorporating AAA rules into an agreement parties clearly and unmistakably evince an intent to delegate questions of arbitrability. …. Th[e] default rule [that ordinarily questions of arbitrability are decided by the Court) was overcome in Terminix, though, because the arbitration agreement at issue there provided that “arbitration shall be conducted in accordance with the Commercial Arbitration Rules then in force of the [AAA].” Those rules, in turn, gave the arbitrator “the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement.” In agreeing to arbitrate according to rules that granted this power to the arbitrator, we reasoned, the parties in Terminix clearly and unmistakably agreed that the arbitrator would have this power
JPay, Inc. v. Kobel, 904 F.3d 923, 937 (11th Cir. 2018) (citations omitted) (emphasis added).
Judge Lucas also recognizes that the Fourth and Fifth District Courts of Appeal in Younessi v. Recovery Racing, LLC, 88 So. 3d 364, 365 (Fla. 4th DCA 2012), and Reunion W. Dev. Partners, LLLP v. Guimaraes, 221 So. 3d 1278, 1280 (Fla. 5th DCA 2017), respectively, have held that where the language of the arbitration provision indicates that the AAA rules “govern” the proceedings, the parties are deemed to have clearly and unmistakably delegated arbitrability. Natt thus recognizes express and direct conflict with Younessi and Reunion: Id. at *10 (“Because we disagree with the conclusion those courts appeared to reach concerning what constitutes sufficient clarity and unmistakability of intent to have an arbitrator, rather than a court, resolve questions of arbitrability, we certify conflict with Reunion and Younessi to the extent they are inconsistent with our decision today.”)
Although the panel decision in Natt is not final and is subject to rehearing, rehearing en banc, and, potentially, conflict review by the Florida Supreme Court, it is worth noting not only for its pro-consumer ruling, but also for providing new guidance on drafting arbitration clauses, namely: drafters should expressly indicate that the parties have agreed to delegate arbitratbility to the arbitrators.
Arbitrability and delegation are complex legal issues under both the Federal Arbitration Act and the Florida Arbitration Code. If you are confronting an issue regarding the interpretation of an arbitration provision in a written contract be sure to seek qualified legal advice. FIDJ’s commercial litigation and corporate attorneys are ready, willing and able to help.