An Agreement to Arbitrate Disputes Will Be Enforced Even Where the Agreement Is Silent as to the Procedures to Be Followed in Arbitration

AN AGREEMENT TO ARBITRATE DISPUTES WILL BE ENFORCED EVEN WHERE THE AGREEMENT IS SILENT AS TO THE PROCEDURES TO BE FOLLOWED IN ARBITRATION

By: Ian T. Kravitz, Esq. and Robert S. Tanner, Esq., Malka & Kravitz, P.A.

In Premier Real Estate Holdings, LLC v. Butch, 2009 WL 4927861 (Fla. 4th DCA, Dec. 23, 2009) Premier Real Estate Holdings (the "Buyer") executed a commercial contract for the purchase and sale of a townhouse development from Park I. Butch (the "Seller"). Buyer gave its initial deposit as required by the purchase contract but never tendered the second deposit as required. The sale fell through. A dispute arose as to whether Seller was required to refund Buyer's deposit. Buyer filed a motion in the circuit court to compel arbitration pursuant to an arbitration provision in the sales contract.

The arbitration provision Buyer relied upon stated that "any controversy or claim arising out of or related to this Contract, or the breach thereof, shall be settled by neutral binding arbitration in Dade County, Florida, in accordance with the rules of ___________________ (Name of Organization) and not by any court action except as provided by Florida law for judicial review of arbitration proceedings ...." Seller argued that by failing to identify the rules that would govern the arbitration (for example the number of arbitrators, how to select arbitrators, the qualifications of the arbitrators, and how arbitrators would be compensated), the parties had not sufficiently agreed on the necessary terms and, therefore, the provision was unenforceable.

The trial court agreed with the Seller that the arbitration provision was unenforceable because of the parties' failure to identify the arbitration procedures to be followed. Buyer appealed, arguing that the failure to specifically provide for the procedures to be followed in arbitration did not render the provision too indefinite to be enforceable.

The appellate court noted that a trial court determining whether a party is entitled to arbitration must consider: (1) whether a valid written agreement to arbitrate exists; (2) whether an arbitrable issue exists; and (3) whether the right to arbitration was waived. The issue for the appellate court was whether there existed a valid written agreement to arbitrate.

Generally an agreement or contract is unenforceable if there is no meeting of the minds between the parties on all essential terms. However, with respect to arbitration provisions, the appellate court in an earlier case had said that an agreement to arbitrate must only "be definite enough so that the parties at least have some idea as to what particular matters are to be submitted to arbitration and set forth some procedures by which arbitration is to be effected." It also noted that the Florida Arbitration Code "does not require an arbitration clause to set forth the 'rules governing the arbitration'" and, further, that the Code "fills in the 'gaps' or missing procedures." Specifically, section 682.04 provides that if an agreement to arbitrate is silent as to how arbitrators shall be selected, the court is granted the authority to appoint an arbitrator or arbitrators to preside over the proceedings. Following these principles, the appellate court reversed the lower court's ruling and remanded for the trial court to issue an order compelling arbitration of Buyer's claims.

This case illustrates that parties may not be able to rely upon the indefiniteness of an arbitration provision to avoid having to arbitrate disputes under the agreement. Florida law strongly favors arbitration as a means of resolving disputes, and arbitration may be compelled even when the agreement to arbitrate is vague and void of agreement on the procedures to be followed in the arbitration proceeding.