Florida Power Corp. v. City of Casselberry

• Citation: 793 So.2d 1174
• Decision Date: 14 September 2001
• Docket Number: No. 5D00-3551.,5D00-3551.
• Parties: FLORIDA POWER CORPORATION, Appellant, v. CITY OF CASSELBERRY, Florida, etc., Appellee.
• Court: Court of Appeal of Florida (US)

793 So.2d 1174

FLORIDA POWER CORPORATION, Appellant, v. CITY OF CASSELBERRY, Florida, etc., Appellee.

No. 5D00-3551.

District Court of Appeal of Florida, Fifth District.

September 14, 2001.

Sylvia H. Walbot, Robert W. Pass, Joseph H. Lang, Jr. of Carlton, Fields, Ward, Emmanuel, Smith & Cutler, P.A., Tallahassee, and R. Alexander Glenn, St. Petersburg, for Appellant.

Gordon H. Harris, Thomas A. Cloud, Tracy A. Marshall, George N. Meros, Jr., of Gray, Harris & Robinson, P.A., Orlando, for Appellee.

PETERSON, J.

Florida Power Corp. (FPC), appeals an order compelling it to arbitrate with the City of Casselberry in order to determine the purchase price of FPC's distribution lines located within the city limits. Casselberry claims that it is entitled to purchase the lines under a 1971 franchise agreement, the terms of which are totally encompassed in an ordinance containing three pages of text.

Casselberry and FPC entered into a thirty-year franchise agreement in 1958 (1958 franchise) also encompassed in a franchise ordinance. The 1958 franchise allowed FPC to install and maintain electrical distribution and transmission equipment on the public right of way within the city limits. The ordinances prohibited Casselberry from engaging in the business of selling or distributing electricity and required FPC to pay Casselberry franchise fees. Upon termination of the franchise agreement, Casselberry had the option of purchasing FPC's distribution facilities within the city limits. The purchase option was mandated by section 167.22, Florida Statutes (1941), which provided that the valuation of FPC's assets was to be set by "arbitration as may be provided by general law." If Casselberry decided not to exercise the purchase option, the 1958 franchise provided that Casselberry would extend the term of the franchise.

In 1971, FPC and Casselberry agreed upon the terms of an ordinance to replace the 1958 franchise. The replacement ordinance (1971 franchise), became effective on April 12, 1971 and expired on April 12, 2001.¹ The 1971 franchise was essentially the same as the 1958 franchise but it did not contain a non-compete agreement and did not commit Casselberry to extend the franchise if the City decided against exercising the purchase option. In 1973, the Florida Legislature repealed Chapter 167, Florida Statutes which required all franchise agreements to contain buyout provisions and terminate within thirty years. See Ch. 73-129, Laws of Florida.²

As the expiration date of the 1971 franchise became imminent, negotiations between Casselberry and FPC began but they failed to agree upon the terms of a third franchise. Casselberry then informed FPC that it intended to exercise its right to arbitrate the purchase price of FPC's electrical distribution facilities so that it could determine whether a purchase was feasible. In response, FPC denied the validity of the purchase option. Casselberry then filed a complaint for declaratory judgment seeking a determination of its rights under the 1971 franchise and also requested an order compelling FPC to submit to arbitration. FPC answered arguing that the 1973 repeal of Chapter 167 invalidated the buyout option and that the court had no jurisdiction to hear the matter because the Public Service Commission (PSC) had exclusive jurisdiction regarding matters of rates, service, and territorial disputes involving electric utilities.

The trial court entered an order compelling FPC to submit to arbitration to determine the value of its assets subject to purchase under the 1971 franchise and require the arbitrators to determine a price within 90 days of the entry of the order. FPC appeals that order.

FPC maintains that there are many obstacles to Casselberry's operation of an electrical distribution system within its city limits, the main one being that the PSC has exclusive jurisdiction over matters of rates, service and territorial disputes involving electrical utilities and that the Federal Energy Regulatory Commission (FERC) now exists which also would have jurisdiction over Casselberry's operations. It is indisputable that Casselberry will not be able to operate its own utility system without integrating its system within and being subject to regulation of a comprehensive system designed to serve the public with electrical energy. But those complex matters are reserved for another day and are prematurely raised in this appeal. The sole issue today is whether Casselberry is entitled to enforcement of a provision allowing it to seek the determination of a purchase price through arbitration. Rule 9.130(a)(3)(C)(v) of the Florida Rules of Appellate Procedure provides that the court may hear an appeal from a nonfinal order that determines "the entitlement of a party to arbitration." See Powertel, Inc. v. Bexley, 743 So.2d 570, 573 (Fla. 1st DCA 1999),

reh'g denied, (Oct. 21, 1999), rev. denied, 763 So.2d 1044 (Fla. 2000) (citations omitted). The general standard of review in declaratory judgment actions is set forth in Williams v. General Insurance Co., 468 So.2d 1033, 1034 (Fla. 3d DCA 1985), where the court stated that "the trial court's decision in a declaratory judgment action is accorded a presumption of correctness...." Here, however, the Court is asked to review the trial court's interpretation of a contract which is a matter of law. See Royal Oak Landing Homeowner's Ass'n, Inc. v. Pelletier, 620 So.2d 786, 788 (Fla. 4th DCA 1993); see also Leseke v. Nutaro, 567 So.2d 949 (Fla. 4th DCA 1990) (the interpretation or construction of a contract is a matter of law, not one of fact, and an appellate court is not restricted in its ability to interpret a written agreement). A decision construing a contract presents an issue of law that is subject to review on appeal by the de novo standard of review. See Inter-Active Servs., Inc. v. Heathrow Master Ass'n, Inc., 721 So.2d 433 (Fla. 5th DCA 1998).

Citing H. Miller & Sons, Inc. v. Hawkins, 373 So.2d 913, 914 (Fla.1979) as support, FPC argues that the repeal of Chapter 167 amended its contract with Casselberry by nullifying the previously mandatory buyout provision which included a valuation of assets by arbitration. H. Miller held that PSC decisions that change the provisions of a contract between a private entity and a public utility which affect rates charged to customers constituted a valid exercise of police power. "Contracts with public utilities are made subject to the reserved authority of the state, under the police power of express statutory or constitutional authority, to modify the contract in the interest of the public welfare without unconstitutional impairment of contract." Id. (citations omitted).

While the PSC can amend private contracts in some circumstances, FPC's arguments are inapplicable in the instant case. The PSC has not intervened in this action nor has the PSC been asked to approve rates, service, or territorial agreements. Moreover, the PSC has no jurisdiction over Casselberry at this time. Therefore, the trial court has proper jurisdiction of this case until such time as Casselberry becomes a retail electric utility or exercises its purchase option. See Fla. Stat. § 366.04(2); see also id. Ch. 166.

Arbitration provisions are generally favored by the courts; however, because arbitration provisions are contractual in nature, construction of such provisions and the contracts in which they appear remains a matter of contract interpretation. See Seifert v. U.S. Home Corp., 750 So.2d 633, 636 (Fla.1999)

(citations omitted); see also R.W. Roberts Constr. Co., Inc. v. St. Johns River Water Management Dist. for Use and Ben. of McDonald Elec., 423 So.2d 630, 632 (Fla. 5th DCA 1982). Accordingly, the determination of whether an arbitration clause requires arbitration of a particular dispute necessarily "rests on the intent of the parties." Id.; see also Regency Group, Inc. v. McDaniels, 647 So.2d 192, 193 (Fla. 1st DCA 1994). "The general rule is that where an arbitration agreement exists between the parties, arbitration is required only of those controversies or disputes which the parties have agreed to submit to arbitration." Miller v. Roberts, 682 So.2d 691, 692 (Fla. 5th DCA 1996). Under both federal statutory provisions and Florida's Arbitration Code, there are three elements for courts to consider in ruling on a motion to compel arbitration of a given dispute: (1) whether a valid written agreement to arbitrate exists; (2) whether an arbitrable issue exists; and (3) whether the right to arbitration was waived. See Seifert, 750 So.2d at 636; Terminix Int'l Co., L.P. v. Ponzio, 693 So.2d 104, 106 (Fla. 5th DCA 1997). Considering these three elements, it seems clear that Casselberry is entitled to arbitrate the valuation.

Although the states may not impose special limitations on the use of arbitration clauses, the validity of an arbitration clause is nevertheless an issue of state contract law. See Powertel, 743 So.2d at 574

. An arbitration clause can be invalidated on such grounds as exist "at law or in equity for the revocation of a contract." Id. (citations omitted). Thus, an arbitration clause can be defeated by any defense existing under the state law of contracts, such as fraud, duress, or unconscionability. See id. These defenses may be applied to invalidate arbitration agreements without contravening the Federal Arbitration Act. See id. (citations omitted). Chapter 682, Florida Statutes, the "Florida Arbitration Code," applies in such cases only to the extent that it is not in conflict with federal law. See id. (citing Shearson/Lehman Bros., Inc. v. Ordonez, 497 So.2d 703 (Fla. 4th DCA 1986); Old Dominion Ins. Co. v. Dependable Reins. Co. Ltd., 472 So.2d 1365 (Fla. 1st DCA 1985)).

FPC has indirectly raised the defense of duress in its allegation that the arbitration clause was included as a requirement of the section 167.22. The inclusion of this provision in any franchise contract was...