Alphagraphics Franchising, Inc. v. Stebbins
| Decision Date | 05 May 1993 |
| Docket Number | No. 92-2874,92-2874 |
| Citation | 617 So.2d 463 |
| Parties | 18 Fla. L. Week. D1136 ALPHAGRAPHICS FRANCHISING, INC., a foreign corporation, Alphagraphics, Inc., a foreign corporation, Rodger G. Ford, individually, and Michael Coffee, individually, Appellants, v. John G. STEBBINS, individually, John G. Stebbins, Inc., a Florida corporation, and George J. O'Rourke, individually, and Andrea O'Rourke, individually, Appellees. |
| Court | Florida District Court of Appeals |
Marc P. Seidler, John F. Verhey, and Peter G. Hallam, Rudnick & Wolfe, Chicago, IL, and Karen M. Buesing of Rudnick & Wolfe, Tampa, for appellants.
David S. Bowman, Taylor, Brion, Buker & Greene, Fort Lauderdale, for appellees John G. Stebbins and John G. Stebbins, Inc.
We affirm the order of the trial court staying arbitration. We believe an order staying arbitration is an order determining the entitlement of a party to arbitration.
As to the merits, the appellee had challenged the arbitration clause itself, claiming it was void or voidable under Florida law. That issue is not subject to arbitration but must be heard by the trial court before arbitration can proceed. See Merrill Lynch Pierce Fenner & Smith, Inc. v. Melamed, 425 So.2d 127 (Fla. 4th DCA 1982), petition for review denied, 433 So.2d 519 (Fla.1983); Wick v. Atlantic Marine, Inc., 605 F.2d 166 (5th Cir.1979). Therefore, there was no error in staying arbitration until this preliminary matter is resolved.
I do not think we have jurisdiction to review this nonfinal appeal of an order staying arbitration in deference to a pending civil action. 1 Rule 9.130(a)(3)(C)(v), Florida Rules of Appellate Procedure, 2 allows review of pretrial orders that merely determine entitlement to arbitration. This order hardly has that effect; instead it merely purports to grant a stay of the arbitration process in favor of the pending civil action. Hence, I do not find jurisdiction under the pre-1993 text of rule 9.130(a)(3)(C)(v) to review this order as a matter of right.
I have jurisprudential reservations against loose constructions of interlocutory appellate jurisdictional provisions--even if, as here, such a construction would allow immediate review of a class of orders that should be so reviewed. Given the strong public policy against piecemeal review, I do not think we should construe the several provisions of rule 9.130(a)(3), contrary to their actual text, literally read, to enlarge the universe of orders subject to nonfinal review. Rather, rule 9.130(a)(3) should be narrowly enforced as written to limit review to only those orders specifically described.
This absence in Florida of review as a matter of right of a nonfinal order staying arbitration in favor of pending litigation creates an anomaly with the federal system. In this case, as we shall see, the substantive dispute between the parties is probably covered by federal law, namely the United States Arbitration Act, 9 U.S.C. sections 1-16 (1990) [USAA]. USAA section 16 allows interlocutory appeals of orders refusing a stay of an action in favor of arbitration, denying an application to order arbitration to proceed, and denying a petition to compel arbitration. See USAA, Sec. 16(a)(1)(A), (B), and (C). Although USAA creates a federal substantive right to arbitration, the Act itself contains no stipulation providing for jurisdiction in a federal district court. USAA thus depends almost entirely on state courts for vindication of the federal right. 3
At the same time, USAA section 16(a) embodies a conscious federal decision to allow immediate review as a matter of right of nonfinal orders refusing to allow or require arbitration to proceed. In contrast, USAA section 16(b) evidences the converse policy not to allow appellate review of nonfinal orders in favor of allowing or requiring arbitration to go forward and to displace any civil action. 4 USAA section 16(a), however, creates appellate jurisdiction only in federal courts; it has no similar effect on the state courts, even though they happen to be the forum chosen by Congress for the primary enforcement of the federal arbitration right. 5
Even assuming that Florida may not be obligated to create a state forum for the vindication of purely federal rights, I have serious doubts that Florida can deliberately close the doors of its courts to claims of right predicated on federal law. 6 Particularly in light of the right/forum anomaly in this situation, as well as the obligation of Florida state judges to enforce the supreme law of the land, 7 I think Florida should amend rule 9.130(a)(3)(C)(v) to mirror USAA section 16(a). 8 As of now, however, we have not done so, and thus I am constrained to find that there is no appellate jurisdiction as a matter of right to review this order, which is effectually against the right to arbitrate.
Treating the papers as a petition for certiorari, however, I think we must grant such extraordinary review. The agreement in this case is between a Florida resident and an Arizona corporation and contains numerous duties of performance by the parties in both Florida and Arizona. USAA section 2 provides:
A written provision in any * * * contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, * * * shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.
USAA section 1 so defines "commerce" as to include commercial dealings between citizens of different states. Hence, it appears that USAA probably covers this agreement, unless the parties expressly excluded USAA by clear agreement, which I have doubts about. 9 Under these circumstances, the arbitration agreement is probably covered by USAA.
The Florida lawsuit was brought by the franchisee. In substance, it alleges fraudulent inducement of both the franchise agreement and the arbitration clause through the use of misrepresentations as to the profitability and growth potential of the business, and as to the failure rate of the franchisor's stores. It seeks damages for fraud, breach of fiduciary relationship, violation of the Florida unfair business practices law, 10 the Florida Sale of Business Opportunities Act, 11 for violation of the Florida statute relating to misrepresentations in the sale of franchises, 12 and for civil conspiracy. It also seeks to relieve the franchisee of duties of performance under the agreement on theories of unconscionability, breach of agreement, and waiver.
The franchisor responded to the lawsuit with an immediate demand for arbitration, which plaintiff refused. It next sought to have the Florida circuit court stay the action pending arbitration, but that application was denied. The franchisor then filed an action in the United States District Court in Tucson seeking an order compelling arbitration, and that court scheduled a hearing on the arbitration issue for October 1992. The franchisee, not being content to await that hearing, however, filed a motion in the Florida circuit court for a stay of the arbitration. After a hearing on September 1st, the circuit judge entered the order involved here.
To determine the propriety of the stay of arbitration, it is necessary to analyze the precise text of the agreement itself, as well as the applicable law. The arbitration clause provides:
All disputes, claims and questions regarding the rights and obligations of Franchisor and Franchisee under the terms of this Agreement, except disputes arising as a result of the field representative's inspection (Section Fifteen) are subject to arbitration. Either party may demand arbitration by filing a written demand with the other party within thirty days (30) after the dispute arises. Arbitration shall be con-ducted in accordance with the rules of the American Arbitration Association.
An analysis of the claims in suit demonstrates that most--if not all--are unavoidably covered by the arbitration clause.
USAA is a "congressional declaration of a liberal federal policy favoring arbitration, notwithstanding any state substantive or procedural policies to the contrary," requiring that all doubts be resolved in favor of arbitration rather than against it. Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 924, 74 L.Ed.2d 765, 785 (1983). Manifestly, the claims for breach of the agreement or breach of fiduciary duties are well within the language of the clause. The fraud in the inducement claim as to the entire agreement is covered by the clause and must be arbitrated under USAA. Prima Paint Corp. v. Flood & Conklin Mfg. Corp., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967). 13 The alleged violations of the Florida franchise protection law are similarly required by USAA to be arbitrated. See Southland Corp. v. Keating, 465 U.S. 1, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984) (). If the alleged franchise law violations must be submitted to agreed arbitration, there seems little basis to distinguish them from the other statutory claims, which are substantively much alike. 14
If an agreement to arbitrate covered by USAA extends to some claims in suit, under the Act a court does not have discretion to deny a motion to stay the civil action pending the arbitration; the court is required to direct the parties to proceed to arbitration. See USAA, Sec. 3 (); see also Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985).
The franchisee's primary argument...
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