Florida Court Finds Arbitration Clause Expanding Authority of Courts to Vacate/Modify Arbitration Awards Unenforceable
The Florida Arbitration Code addresses the confirmation, vacation, modification or correction, and appeal of arbitration awards in Florida. In September, a Florida District Court of Appeal addressed whether parties may expand the scope of judicial review provided under the Florida Arbitration Code. In National Millwork, Inc. v. ANF Group, Inc., a subcontractor sought to void the arbitration clause in its subcontract by arguing that the provision impermissibly expanded the scope of judicial review to include a determination as to whether the arbitrator properly applied Florida law.
The Florida Arbitration Code limits the authority of Florida courts to vacate and/or modify arbitration awards to circumstances when an award is procured by corruption, fraud, or other undue means or when there is evident partiality, corruption or misconduct by the arbitrator. The Florida Arbitration Code also prohibits parties from varying the grounds for vacating or modifying an award.
The appellate court in National Millwork concluded that the subcontract arbitration provision allowing for appellate review of the arbitrator’s application of Florida law fell outside the scope of judicial review allowed under the Florida Arbitration Code. The court relied on the parallel analysis of the U.S. Supreme Court when addressing comparable considerations under the Federal Arbitration Act. As a result, the court reversed the lower court’s order compelling arbitration and remanded for consideration as to whether the portion of the arbitration clause that inappropriately expanded judicial review rendered the entire clause void or whether that portion could be severed from the rest of the clause.
The Florida appellate court’s decision clarifies the scope of permissible judicial review of arbitration awards under Florida law. Many states’ arbitration statutes mirror the Florida statute at issue in this case, and caution should be exercised when drafting contractual arbitration provisions that run counter to a state’s applicable arbitration statutes.
While the inclusion of a “severability clause” into a contract may help avoid rendering the entire arbitration clause unenforceable, that result is not guaranteed. If a court finds that the offending portion of an arbitration clause is integral to the agreement to arbitrate, it may void the entire clause. In such circumstances, a party may unexpectedly find itself litigating an action in state court and unable to take advantage of the arbitration provision duly negotiated by the parties at the start of the project. If you have questions about reviewing arbitration clauses or other contract provisions, please contact Aman Kahlon for more information.