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Spring 2012
IN THIS ISSUE
d&G Lawyer News
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Florida Supreme Court strikes down limitations of remedies clauses in arbitration agreements
By: Michael R. Bray
Two recent Florida Supreme Court decisions have addressed the issue of the enforceability of limitations of remedies provisions in arbitration agreements under Florida law. In Shotts v. OP Winter Haven, Inc., -- So. 3d --, 2011 WL 5864830 (Fla. 2011), and Gessa v. Manor Care of Florida, Inc., -- So. 3d --, 2011 WL 5864823 (Fla. 2011),1 the Court struck down those provisions of nursing home arbitration agreements that ban punitive damages and that cap damages below the statutorily available amount. The issue had previously been addressed by the district courts of appeal, but as the Court noted in Shotts, the decisions of those courts varied. The Florida Supreme Court has now weighed in, and Florida law is now clear. An arbitration agreement cannot limit specific statutory remedies.
In Shotts, a man was injured in a car accident in 1977, and sustained brain damage. For many years, he was cared for by his niece, but eventually he was admitted to a nursing home. He remained there until his death in 2003, at which time his niece, as his personal representative, filed a complaint against the nursing home, alleging negligence and breach of fiduciary duty. The nursing home moved to compel arbitration, based on the agreement the niece had signed. Among other things, the agreement contained a provision that the arbitrator would have no authority to award punitive damages.
In Gessa, a nursing home resident filed suit against the nursing home during her stay alleging negligence, violation of resident's rights, and breach of fiduciary duty. As in Shotts, the nursing home moved to compel arbitration. At the time of admission, the woman's daughter, as attorney-in-fact, had signed admissions documents containing an arbitration agreement that capped noneconomic damages at $250,000 and waived punitive damages. The statutes at issue, Sections 400.022 and 400.023, Florida Statutes, provide for punitive damages, and contain no cap on damages for pain and suffering.
In both Shotts and Gessa, the plaintiffs contested the enforceability of their arbitration agreements, arguing that it is a violation of public policy for an arbitration agreement to limit specific statutory remedies set forth by the Legislature. The Florida Supreme Court agreed. In light of the need for these legislatively-created remedies and the useful purpose they serve, the Court held that when an arbitration agreement undermines those remedies, it stands in violation of the public policy of Florida and is unenforceable.
The basic question at issue in Shotts and Gessa was whether parties are entitled to the same substantive rights in an arbitration forum as they would have in court. In other words, when the Legislature has provided a specific substantive right, can an arbitration agreement limit that right? The Florida Supreme Court answered that question in the negative. Parties have the same substantive rights regardless of the forum in which a dispute is to be resolved. By its holdings in these two cases, the Court has made clear that under Florida law, arbitration agreements that diminish or circumvent a specific statutory remedy are void as against public policy, and are unenforceable.
Businesses that rely on arbitration agreements should have them reviewed by legal counsel to ensure their compliance with this recent development.
de la Parte & Gilbert, P.A. frequently represents clients concerning arbitration agreements. For more information, contact Michael Bray at mbray@dgfirm.com.
1Please note that both cases have pending motions for rehearing.
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