When drafting an arbitration agreement, a party often may want the matter to be heard by a professional arbitration panel, such as AAA or JAMS. However, from time-to-time, some of these groups have declined to hear matters governed by pre-incident arbitration waivers in consumer agreements. How do you write a broad arbitration agreement that still references the group or rules you want to follow?
The best approach is to have a substantively broad arbitration clause AND a reference to the procedural rules that you want to follow. This provides some certainty as to what procedures apply; it avoids the need to re-create an entire set of rules; and points to the preferred arbitration group without committing to using them if an unforeseen problem arises.
We see a variation on this approach in the November 2018 opinion from the Florida’s Second DCA in Peter Adkins v. Memorial Motors, Inc. dba Lakeland Toyota. Here, a consumer bought a car from a Florida dealership and the retail installment sale contract contained this provision:
“[the parties shall arbitrate any dispute] which arises out of or relates to . . . [the] condition of this vehicle”
This arbitration clause is generally considered to be broad given that it uses the (magic) words, “arises out of or relates to” (or you can use “arising from or relating to”). The language “condition of this” might be considered narrowing the scope but that was not an issue in this case.
The court also explained that, as far as procedure, the contract did NOT require use of the AAA:
Here, the parties’ arbitration agreement provides that Adkins may choose the AAA “or any other organization to conduct the arbitration subject to” Lakeland Toyota’s approval.
There was a (case-specific) problem with AAA accepting this matter; the consumer-plaintiff then claimed that the arbitration clause was unenforceable as written.
- As written, the contract did not expressly incorporate the AAA Consumer Arbitration Rules since a party could arbitrate with the AAA “or any other organization…”
- The court contrasted the immediate situation with the Fourth DCA’s opinion in Yonessi v. Recovery Racing, LLC, where the contract “clearly indicates that the AAA rules govern” (unfortunately, the Yonessi court did not quote the language it had enforced).
- Just because a professional panel like the AAA is unavailable does NOT negate the parties’ intent to arbitrate. So if an agreement points to a non-existent arbitrator, it reverts back to the parties to agree OR the court to appoint.
Writing arbitration agreements is not easy. There have been a half dozen Florida appellate cases interpreting arbitration agreements in November – December 2018 alone. That suggests there are poorly written and outdated ADR agreements being used by Florida businesses AND/OR that the lawyers seeking to avoid contract limitations are aggressive and clever.
If your contracts contain arbitration, limits of liability, or other alternative dispute terms, it is imperative to make sure you have the right protective language AND that it is consistent with the rest of your document (don’t just plug in language from cases — it has to harmoniously fit).
An experienced lawyer, who knows what he or she is doing, should be able to update your agreement for about $500-600. Consult a qualified litigator in your area who has written and litigated arbitration and liability waiver provisions. Ask lawyers specific questions about their experience writing and litigating (and appealing) these terms before you them. Good luck!
Image credit: Lakeland Toyota