Opinion
No. 1D20-3778
08-23-2021
Darcell WICK, as Personal Representative of the Estate of Geraldine Harris, Appellant, v. ORANGE PARK MGT, LLC, d/b/a Oak View Rehabilitation Center; Kingsley Avenue Mgt, LLC; William Stewart Swain; Laverne Patrick Herzog; and James David Prater, Appellees.
Jessie L. Harrell of The Harrell Firm, Jacksonville, for Appellant. Geoffrey D. Sessions, Adam G. Prom, and Elisabeth A. Avilla of Hall Booth Smith, P.C., Jacksonville, for Appellees.
Jessie L. Harrell of The Harrell Firm, Jacksonville, for Appellant.
Geoffrey D. Sessions, Adam G. Prom, and Elisabeth A. Avilla of Hall Booth Smith, P.C., Jacksonville, for Appellees.
ROWE, C.J.
After her mother died in a nursing home, Darcell Wick, as personal representative of her mother's estate, sued the nursing home and its agents. Wick alleged negligence, wrongful death, and a violation of the nursing home resident's statutory bill of rights. The defendants, Orange Park Mgt., LLC; Kingsley Avenue Mgt., LLC; William Stewart Swain; Laverne Patrick Herzog; and James David Prater (collectively, Orange Park), moved to compel arbitration, citing the arbitration clause in the nursing home's admission agreement. Wick opposed the motion, arguing that the cost of arbitration was so expensive that it rendered the arbitration clause invalid. She also argued that the arbitration agreement was void as a matter of public policy. Orange Park countered that the agreement did not violate public policy. It also argued that the prohibitive cost of arbitration was not a stand-alone defense to arbitration. Rather, it was part of an unconscionability defense, requiring Wick to show that the arbitration clause was both substantively and procedurally unconscionable. Because Wick did not allege or prove procedural unconscionability, Orange Park asserted that the arbitration clause was enforceable. The trial court agreed and granted the motion to compel arbitration.
Wick appeals the trial court's order compelling arbitration. She asserts that the trial court erred by (1) concluding that prohibitive cost was not a stand-alone defense to arbitration, (2) determining that the agreement was not void as a matter of public policy, and (3) requiring Wick to arbitrate with persons not party to the arbitration agreement. We affirm the third issue without further discussion because Wick failed to preserve her argument for appellate review. We affirm the first and second issues for the reasons explained below.
I. Analysis
Because the order granting the motion to compel turns on the construction of the arbitration agreement, our review is de novo. See CEFCO v. Odom , 278 So. 3d 347, 351 (Fla. 1st DCA 2019).
The Florida Arbitration Code (FAC) provides:
Two or more parties may agree in writing to submit to arbitration any controversy existing between them at the time of the agreement, or they may include in a written contract a provision for the settlement by arbitration of any controversy thereafter arising between them relating to such contract or the
failure or refusal to perform the whole or any part thereof.
§ 682.02, Fla. Stat. (2010).
In Florida, arbitration agreements are favored. See Jackson v. Shakespeare Found., Inc. , 108 So. 3d 587, 593 (Fla. 2013) ("Courts generally favor [arbitration] provisions, and will try to resolve an ambiguity in an arbitration provision in favor of arbitration."). A party to an arbitration agreement may file a motion in the trial court seeking to compel the parties to proceed to arbitration. See § 682.03(1), Fla. Stat. (2010). When evaluating a motion to compel arbitration, a trial court must consider three factors: "(1) whether a valid written agreement to arbitrate exists; (2) whether an arbitrable issue exists; and (3) whether the right to arbitrate was waived." Basulto v. Hialeah Auto. , 141 So. 3d 1145, 1152 (Fla. 2014) (quoting Seifert v. U.S. Home Corp. , 750 So. 2d 633, 636 (Fla. 1999) ).
The arbitration agreement here provides:
Optional Arbitration Clause: Any action dispute, claim or controversy of any kind (tort, contract, equitable or statutory, including by not limited to claims of violations of Resident's Rights) now existing or hereafter arising between the parties, in any way arising from or relating to this Agreement governing the Resident's stay at the Facility, shall be resolved by binding arbitration. Such binding arbitration shall be governed by the provisions of the Florida Arbitration Code, F.S. 682.01 et seq. As appropriate and in the event that the Florida Arbitration Code is deemed to not apply, binding arbitration shall be governed by the Federal Arbitration Act. OPTIONAL: If the parties do not agree to this Arbitration Clause, please mark an X to void this clause only.
Arguing that the arbitration agreement was invalid, Wick sued in the circuit court. Orange Park then moved to compel arbitration. The only question before the trial court and at issue on appeal pertains to the first factor of the three-factor test approved in Seifert : was the arbitration agreement valid?
To answer that question, the trial court must consider standard contract defenses such as fraud, duress, or unconscionability. Shotts v. OP Winter Haven, Inc. , 86 So. 3d 456, 464 (Fla. 2011) ; see also Gainesville Health Care Ctr., Inc. v. Weston , 857 So. 2d 278, 283 (Fla. 1st DCA 2003) (holding that the FAC permits a challenge to the validity of an arbitration agreement based on any state-law contract defense). But an arbitration agreement may also be invalidated on public policy grounds. See Shotts , 86 So. 3d at 474.
Wick did not challenge the arbitration agreement on grounds of fraud or duress. She argued only that the agreement was invalid because, five years after the parties executed the agreement, the cost of arbitration was too prohibitively expensive for Wick to prosecute her statutory claims. Taking Wick's argument as one seeking to invalidate the arbitration agreement on grounds of unconscionability, the trial court, applying the traditional test for unconscionability, concluded that Wick had the burden to prove both procedural and substantive unconscionability. See Basulto , 141 So. 3d at 1157–58.
Even so, Wick offered two reasons that she did not have to show procedural unconscionability for the trial court to find that the arbitration agreement was invalid. First, relying on judicial constructions of the Federal Arbitration Act (FAA) establishing the prohibitive cost of arbitration as a stand-alone defense to an arbitration agreement, Wick argued that the prohibitive-cost doctrine applies equally to an arbitration agreement governed by Florida law. Second, Wick argued that the agreement was void as a matter of public policy. The court determined that prohibitive cost is not a stand-alone defense to an arbitration agreement governed by Florida law and rejected Wick's public policy argument. For those reasons, the trial court granted Orange Park's motion to compel arbitration.
Wick argues that the trial court reversibly erred when it rejected prohibitive cost as a stand-alone defense to the arbitration agreement and when it concluded that the agreement did not violate public policy. Both of Wick's arguments lack merit.
A. Prohibitive Cost as a Stand-Alone Defense
Wick's argument on the prohibitive cost defense does not fail for want of legal authority. Several decisions from the United States Supreme Court suggest that a trial court may find an arbitration agreement invalid based only on the prohibitive cost of arbitration when the cost of arbitration prevents a party from effectively vindicating her statutory rights under federal law. Green Tree Fin. Corp.-Ala. v. Randolph , 531 U.S. 79, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000). The "effective vindication" exception to an arbitration agreement governed by the FAA was first expressed in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc. , 473 U.S. 614, 637 n.19, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985). There, the United States Supreme Court reasoned that a court could invalidate, on public policy grounds, arbitration agreements that "operat[e] ... as a prospective waiver of a party's right to pursue statutory remedies." Id. ; see also 14 Penn Plaza LLC v. Pyett , 556 U.S. 247, 273—74, 129 S.Ct. 1456, 173 L.Ed.2d 398 (2009) (recognizing the existence of the effective vindication exception, though not applying it to invalidate the arbitration agreement at issue). The effective vindication exception "rest[s] on the principle that other federal statutes stand on equal footing with the FAA." Ferguson v. Corinthian Colls., Inc. , 733 F.3d 928, 936 (9th Cir. 2013). Thus, when the cost of arbitration is so expensive that it prevents a party from effectively vindicating federal statutory rights, a court may determine that the arbitration agreement is invalid on that ground alone. Green Tree , 531 U.S. at 90, 121 S.Ct. 513.
Even so, while it has judicially recognized the effective vindication exception to the FAA, the Supreme Court has repeatedly declined to apply the exception to invalidate an arbitration agreement in any case before it. See Am. Express Co. v. Italian Colors Rest. , 570 U.S. 228, 235–36, 133 S.Ct. 2304, 186 L.Ed.2d 417 (2013) (describing the "effective vindication" exception as a "judge-made exception to the FAA" and pointing out that the Court had "declined to apply it to invalidate the arbitration agreement at issue" and in any case the Court had decided since the exception "originated as dictum in Mitsubishi Motors ").
With this understanding of the origins of the effective vindication exception, the question here is: how do the Supreme Court's decisions in Mitsubishi , Green Tree , and Italian Colors , judicially establishing prohibitive cost as a stand-alone defense to an arbitration agreement governed by the FAA, inform whether the defense is available to invalidate an arbitration agreement controlled by the FAC?
The Supreme Court has not extended the effective vindication exception or the prohibitive-cost defense to claims arising under state law. And state courts have reached different conclusions about whether to recognize prohibitive cost as a stand-alone defense to an agreement governed by a state arbitration law and raising state statutory claims. Compare Stokes v. Allenbrooke Nursing and Rehab. Ctr., LLC , No. W2019-01983-COA-R3-CV, 2020 WL 5536704, at *5 (Tenn. Ct. App. Sept. 15, 2020) (holding that when the claims at issue implicate only state law "and not a federal statutory right, state unconscionability law must be the polestar for examining a cost prohibitive argument, not Green Tree and its progeny"); with Falls v. 1CI, Inc. , 208 Md.App. 643, 57 A.3d 521, 539 (2012) (finding the reasoning in Green Tree to be persuasive).
The Florida Supreme Court has not addressed whether a trial court may invalidate an arbitration agreement governed by the FAC based only on the prohibitive cost of arbitration. But Florida's district courts have. And they have reached different conclusions.
The Second and Fifth Districts have held that prohibitive cost is a stand-alone defense to an arbitration agreement. See Zephyr Haven Health & Rehab Ctr., Inc. v. Hardin , 122 So. 3d 916, 922 (Fla. 2d DCA 2013) (explaining that although the plaintiff did not meet her burden to show that the costs of arbitration were prohibitive, a trial court could invalidate an arbitration agreement based on "some showing of individualized prohibitive expense"); FI-Tampa, LLC v. Kelly-Hall , 135 So. 3d 563, 567 (Fla. 2d DCA 2014) (explaining that "since Green Tree [,] the issue of the prohibitive costs of arbitration has developed into a separate defense to the enforcement of an arbitration agreement); Catastrophe Servs., Inc. v. Fouche , 145 So. 3d 151, 155–56 (Fla. 5th DCA 2014) (same); Fi-Evergreen Woods, LLC v. Estate of Vrastil , 118 So. 3d 859 (Fla. 5th DCA 2013) (same).
But the Fourth District reached the opposite conclusion. See Stewart Agency, Inc. v. Robinson , 855 So. 2d 726, 728–29 (Fla. 4th DCA 2003) (on motion for rehearing). It held that a trial court should consider the costs of arbitration under the substantive unconscionability prong of the traditional unconscionability analysis. Id. at 728. Thus, a party asserting prohibitive cost must also show procedural unconscionability for a trial court to find an arbitration agreement invalid. Id.
This Court has mentioned the prohibitive-cost defense once, in Brasington v. EMC Corp. , 855 So. 2d 1212 (Fla. 1st DCA 2003). There, this Court explained that the United States Supreme Court in Green Tree had recognized that large arbitration costs could prevent a litigant from effectively vindicating her federal statutory rights. Id. at 1216. Even so, the Court did not decide whether the prohibitive cost defense barred enforcement of the arbitration agreement in that case because Brasington did not allege that "the expenses of arbitration would be so high as to prevent her from pursing her claims." Id. Thus, any statement in Brasington suggesting that prohibitive cost is a stand-alone defense to enforcement of an arbitration agreement is "obiter dictum, pure and simple." Doherty v. Brown , 14 So. 3d 1266, 1267 (Fla. 1st DCA 2009).
Based on our examination of these decisions, we find no persuasive authority for extending the judicially-crafted effective vindication exception and prohibitive-cost defense to an agreement governed by the FAC and presenting a claim arising under state law. The United States Supreme Court has not applied the effective vindication exception to the FAA or the prohibitive-cost defense to invalidate an arbitration agreement in any case since it recognized the effective vindication exception in dicta thirty-six years ago. Absent direction from the Florida Legislature or the Florida Supreme Court, we decline to judicially craft an exception to the FAC based on the prohibitive cost of arbitration. It is simply not the role of the judiciary to rewrite the terms of a contract the parties freely negotiated at arms length. Cf. Progressive Am. Ins. Co. v. Broward Ins. Recover Ctr. , LLC , 322 So. 3d 103 (Fla 4th DCA May 27, 2021) (Artau, J., concurring) ("[I]n the absence of legislative authority, we should not apply [the prohibitive-cost] doctrine to rewrite this or any other contractual provision."). Indeed, "courts are powerless to rewrite contracts or interfere with the freedom of contracts or substitute [their] judgment for that of parties to the contract in order to relieve one of the parties from apparent hardships of an improvident bargain." See Quinerly v. Dundee Corp. , 159 Fla. 219, 31 So. 2d 533, 534 (1947).
Rather, we will follow the Florida Supreme Court's instruction in Basulto and consider the validity of arbitration agreements governed by the FAC by applying the traditional contract defenses of fraud, duress, and unconscionability. 141 So. 3d at 1152. Thus, when a party seeking to avoid arbitration asserts that the costs of arbitration are prohibitive, that argument informs only the substantive unconscionability prong of the traditional test for unconscionability. See Robinson , 855 So. 2d at 728–29. Put differently, even if a party shows that the costs of arbitration are "so high as to make access to the forum impracticable," a court cannot find the arbitration agreement invalid unless the party also shows procedural unconscionability. See Italian Colors , 570 U.S. at 235–36, 133 S.Ct. 2304 ; Basulto , 141 So. 3d at 1158.
Applying our holding to this case, Wick's prohibitive cost defense fails. Even assuming she could show that the arbitration agreement was substantially unconscionable, Wick never alleged or presented any evidence of procedural unconscionability. Because there was no evidence of procedural unconscionability, Wick's prohibitive cost argument fails. See Shotts , 86 So. 3d at 464.
B. Public Policy Defense
Even so, Wick, argues that the trial court should have found that the arbitration agreement with Orange Park was void as a matter of public policy. Citing the Florida Supreme Court's decision in Shotts , Wick contends that the agreement violates public policy because the prohibitive cost of arbitration substantially diminishes the remedy provided under the Nursing Home Residents Act (NHRA). See § 400.023, Fla. Stat. (2010). She asserts that the cost of arbitration prevents her from effectively obtaining remedies available to her under the NHRA—but not because the agreement itself eliminates a statutory remedy. Instead, Wick argues that the agreement deprives her of remedies available under the statute based on circumstances outside the agreement—her inability to pay the costs of arbitration. This is a misapplication of Shotts .
In Shotts , the supreme court explained that "any arbitration agreement that substantially diminishes or circumvents [statutory] remedies stands in violation of the public policy of the State of Florida and is unenforceable." 86 So. 3d at 474. The Court held that the arbitration agreement in that case violated public policy because the agreement eliminated statutory remedies available to the plaintiff under the NHRA. Id . at 472. Contrary to the provisions of the NHRA allowing a plaintiff to recover punitive damages, the arbitration agreement prevented arbitrators from awarding punitive damages. Id . at 471 ; see also Sarasota Facility Operations, LLC v. Manning , 112 So. 3d 712, 714 (Fla. 2d DCA 2013) (explaining that the issue in Shotts was whether the rules of a particular arbitration forum "were void as against public policy because they limited the remedies available to a litigant"); Estate of Deresh ex rel. Schneider v. FS Tenant Pool III Tr. , 95 So. 3d 296, 299 (Fla. 4th DCA 2012) (explaining that the analysis in Shotts "focused solely on the [American Health Lawyers Association]-rules provision, which provided that the arbitrator could not award ‘consequential, exemplary, incidental, punitive or special damages’ "). On its face, the agreement at issue in Shotts limited statutory remedies under the NHRA and would have applied to any nursing home resident who signed the agreement. Id .
Unlike the agreement examined in Shotts , the arbitration agreement here does not eliminate or limit a statutory remedy available to Wick under the NHRA. Instead, Wick's public policy argument for invalidating the agreement on grounds of the prohibitive cost of arbitration depends solely on her own financial circumstances existing five years after the parties executed the agreement. Taking the approach suggested by Wick, a trial court could invalidate an arbitration agreement on public policy grounds based only on the post-hoc financial circumstances of a party seeking to avoid arbitration. Shotts does not compel such a result. This is because nothing on the face of the arbitration agreement eliminates or limits any remedy available to Wick. As a result, Shotts does not support Wick's argument that the arbitration agreement with Orange Park is void as a matter of public policy.
II. Conclusion
For the reasons above, we affirm the trial court's order compelling the parties to proceed with arbitration. Further, as to whether prohibitive cost can be a stand-alone defense to an arbitration agreement governed by the FAC, we certify conflict with the decisions of the Second District and the Fifth District in Zephyr Haven Health & Rehab Center, Inc. v. Hardin , 122 So. 3d 916 (Fla. 2d DCA 2013) ; FI-Tampa, LLC v. Kelly-Hall , 135 So. 3d 563 (Fla. 2d DCA 2014) ; Catastrophe Services., Inc. v. Fouche , 145 So. 3d 151 (Fla. 5th DCA 2014) ; and Fi-Evergreen Woods, LLC v. Estate of Vrastil , 118 So. 3d 859 (Fla. 5th DCA 2013).
AFFIRMED and CONFLICT CERTIFIED.
Roberts, J., concurs; Jay, J., dissents without opinion.