Rosen v. Shearson Lehman Bros., Inc.

Decision Date15 November 1988
Docket NumberNo. 88-1103,88-1103
Citation534 So.2d 1185,13 Fla. L. Weekly 2503
Parties13 Fla. L. Weekly 2503 Paul ROSEN and Judith Rosen, his wife, Appellants, v. SHEARSON LEHMAN BROTHERS, INC., Appellee.
CourtFlorida District Court of Appeals

Cohen & Silver and Patricia M. Silver, Miami, for appellants.

Paul, Landy, Beiley & Harper and Richard E. Brodsky, Miami, for appellee.

Before BARKDULL, DANIEL S. PEARSON and JORGENSON, JJ.

DANIEL S. PEARSON, Judge.

The question raised in this appeal of an order compelling arbitration is whether Shearson Lehman Brothers' act of suing the defendant-customers waives the stockbroker's right to arbitration or whether, as Shearson contends, the customers' failure to show that they were substantially prejudiced by the stockbroker's delay in seeking arbitration precludes the waiver. We agree with the customers that the stockbroker's institution of suit ipso facto waives the wholly inconsistent right to seek arbitration and, therefore, reverse the order under review.

Without dispute, the underlying agreement between the Rosens and Shearson Lehman Brothers, Inc. deals with transactions in interstate commerce, and the case is therefore governed, as the stockbroker correctly observes, by the Federal Arbitration Act. Trojan Horse, Inc. v. Lakeside Games, 526 So.2d 194 (Fla. 3d DCA 1988). Under the Federal Arbitration Act, as Shearson again correctly points out, several federal circuit courts of appeals have held that a defendant must show prejudice before it can be said that the plaintiff's institution of suit is a waiver of the right to arbitrate. See Rush v. Oppenheimer & Co., 779 F.2d 885 (2d Cir.1985); Fraser v. Merrill Lynch Pierce, Fenner & Smith, Inc., 817 F.2d 250 (4th Cir.1987); Maxum Foundations, Inc. v. Salus Corp., 779 F.2d 974 (4th Cir.1985); Lawrence v. Comprehensive Business Services Co., 833 F.2d 1159 (5th Cir.1987); Valero Refining, Inc. v. M/T Lauberhorn, 813 F.2d 60 (5th Cir.1987); Fisher v. A.G. Becker Paribas Inc., 791 F.2d 691 (9th Cir.1986). See also Drexel Burnham Lambert, Inc. v. Warner, 665 F.Supp. 1549 (S.D.Fla.1987). 1 In contrast, one federal circuit has explicitly held that "waiver may be found absent a showing of prejudice." National Foundation for Cancer Research v. A.G. Edwards & Sons, Inc., 821 F.2d 772, 777 (D.C.Cir.1987). 2

While, as is evident, the question is one upon which reasonable judges differ, we are persuaded that the rule which we should follow--since the federal cases presently leave us the choice--is that the right to arbitrate is waived when one of the parties to the agreement providing for arbitration affirmatively selects a course of action--litigation in the courts--which runs counter to the very purpose of arbitration.

We again acknowledge that federal law controls, but are nonetheless comforted by the fact that our choice is consistent with the rule announced by Florida courts in cases deciding this same waiver issue under the Florida Arbitration Code. As the Fourth District recently stated in Finn v. Prudential-Bache Securities, Inc., 523 So.2d 617, 619-20 (Fla. 4th DCA 1988):

"Respondent argues that the party opposing arbitration must make a strong showing of both inconsistent acts and actual prejudice. However, the cases cited by respondent make it clear that actual prejudice must be shown only where there is a finding of waiver based on delay in assertion of one's right. A showing of prejudice is not required if waiver is based upon inconsistent acts."

(citations omitted, emphasis in original).

The statement in Finn is, of course, supported by numerous Florida cases holding that waiver may be established without a showing of prejudice. Riverfront Properties, Ltd., v. Factor, 460 So.2d 948, 952 (Fla. 2d DCA 1984) ("Initiating legal action without seeking arbitration acts as a waiver...."); Ojus Industries, Inc. v. Mann, 221 So.2d 780, 782 (Fla. 3d DCA 1969) ("[W]here a plaintiff, in disregard of his right to arbitration, files suit for determination of the controversy, he will be held to have waived his right to compel arbitration thereof."). See Lapidus v. Arlen Beach Condominium Association, Inc., 394 So.2d 1102, 1103 (Fla. 3d DCA 1981) ("Filing an answer without asserting the right for arbitration acts as a waiver, as does initiating legal action without seeking arbitration....") (citations omitted). See also Klosters Rederi A/S v. Arison Shipping Co., 280 So.2d 678, 681 (Fla.1973) ("A party's contract right [to arbitration] may be waived by actively participating in a lawsuit or taking action inconsistent with that right."); Prudential-Bache Securities, Inc. v. Pauler, 488 So.2d 894, 895 (Fla. 2d DCA 1986) ("The rule is that a party is deemed to...

To continue reading

Request your trial
14 cases
  • Victor v. Dean Witter Reynolds, Inc.
    • United States
    • Florida District Court of Appeals
    • September 25, 1992
    ...This case is governed by the FAA since it involves a securities transaction in interstate commerce. Rosen v. Shearson Lehman Bros., Inc., 534 So.2d 1185, 1186 (Fla. 3d DCA 1988), rev. denied, 544 So.2d 200 (Fla.1989). Federal courts applying the FAA have almost uniformly held that, assuming......
  • RAYMOND JAMES FIN. SERVICES, INC. v. Saldukas
    • United States
    • Florida District Court of Appeals
    • August 8, 2003
    ...National Foundation for Cancer Research v. A.G. Edwards & Sons, 821 F.2d 772, 777 (D.C.Cir.1987); see also Rosen v. Shearson Lehman Brothers, Inc., 534 So.2d 1185, 1187 (Fla. 3d DCA),rev. denied, 544 So.2d 200 In the absence of a binding federal ruling on this issue, we are free to apply th......
  • Beverly Hills Development Corp. v. George Wimpey of Florida, Inc.
    • United States
    • Florida District Court of Appeals
    • October 27, 1995
    ...constitutes an affirmative selection of a course of action which runs counter to the purpose of arbitration. Rosen v. Shearson Lehman Bros., 534 So.2d 1185 (Fla. 3d DCA 1988), rev. denied, 544 So.2d 200 (Fla.1989); Finn. The party who opposes arbitration need not demonstrate actual prejudic......
  • Donald & Co. Securities, Inc. v. Mid-Florida Community Services, Inc.
    • United States
    • Florida District Court of Appeals
    • April 30, 1993
    ...National Foundation for Cancer Research v. A.G. Edwards & Sons, 821 F.2d 772, 777 (D.C.Cir.1987); see also Rosen v. Shearson Lehman Brothers, Inc., 534 So.2d 1185, 1187 (Fla. 3d DCA), rev. denied, 544 So.2d 200 In the absence of a binding federal ruling on this issue, we are free to apply t......
  • Request a trial to view additional results
1 books & journal articles
  • The inadvertent waiver of mandatory construction arbitration clauses.
    • United States
    • Florida Bar Journal Vol. 71 No. 9, October 1997
    • October 1, 1997
    ...(Fla. 5th D.C.A. 1995); Bared and Co. v. Specialty Maintenance, 610 So. 2d I (Fla. 2d D.C.A. 1992); Pozen v. Shearson Leiman Brothers, 534 So. 2d 1185 (Fla. 3d D.C.A. 1988); rev. denied., 544 So. 2d 200 (Fla. [52] Smith v. Petrou, 705 F. Supp. 183 (S.D.N.Y. 1989) [53] Preferred Mutual Insur......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT