Question of the Week
Stories about runaway jury verdicts seem to be in the headlines all the time, and I am concerned about my business. How can I minimize my risk?
Litigation is never a pleasant experience, especially when it takes place in an unwelcoming forum. The judges and juries in any venue have their own perspectives on litigation, but, according to the American Tort Reform Association, south Florida ranks as the most challenging based on its "reputation for high awards and plaintiff-friendly rulings that make it a launching point for dubious claims and novel theories of recovery." Fortunately, Florida businesses can avail themselves of other dispute resolution mechanisms that may insulate them from this additional risk if they plan for it in advance.
The two most common techniques are contractual clauses calling for mediation and arbitration. Mediation typically involves a non-binding process where a third-party neutral listens to each party's positions and tries to help guide them to a negotiated agreement that resolves the dispute. Arbitration is a more formal process that resembles a trial in certain respects, but is conducted in private before an arbitrator who has received special training and is frequently a seasoned lawyer or industry professional. While mediation focuses on guiding the parties to a mutually agreeable resolution, arbitration is more confrontational with the arbitrator rendering a decision as to the outcome after hearing the parties' arguments and receiving their supporting evidence.
Contracts may require that disputes be submitted to mediation, arbitration or both, but businesses must be careful in drafting their agreements to be certain that they are broad enough in scope and meet the particular legal requirements required to avoid the judicial process.Clauses requiring the use of alternative dispute resolution mechanisms are enforceable in Florida's courts, but the method of enforcement is undergoing significant change. Historically, both federal and Florida laws required courts to enforce such clauses by prohibiting courts from proceeding on a suit when the parties have agreed to resolve their dispute through other vehicles, but a very recent decision makes it plain that, to avoid the courthouse altogether, a dispute resolution clause must contemplate a process that results in a final award that can be confirmed by a court and turned into a final judgment.
Some businesses, perhaps fearful of committing fully to an alternative dispute resolution process, may include language calling for "non-binding mediation or arbitration." The United States Court of Appeals for the Eleventh Circuit recently determined that a mediation clause is not enforceable under the Federal Arbitration Act, which is the analog to Florida's Arbitration Act, such that a party who finds itself in a law suit despite a mediation clause will not be able to automatically escape the courthouse. The court did not directly address the question of whether clauses calling for non-binding arbitration would likewise be unenforceable, but, given the logic of the decision and the absence of a final binding award in non-binding arbitration, it certainly seems probable that courts will be more reluctant to enforce these clauses and may proceed with the judicial process as if they did not exist. Concerned businesses should certainly tread lightly when making this decision. Committing to a binding private process should not be done without forethought, but it seems very likely that a company that tries to get the "best of both worlds" through a non-binding clause may be in for an unwelcome surprise when it attempts to escape a hostile courtroom.
For more information, please contact William Adams.
