Appellant Prestige Protective Corporation ("Prestige"), plaintiff below, timely appeals a June 1, 2000 non-final order compelling arbitration.
Prestige and appellee Burns International Security Services Corp.
The note went on to provide:
A year after the closing, Burns submitted the report required under the note. The report indicated that the customer retention percentage was less than 80%, so that no additional money was due under the note. On July 20, 1999, Prestige responded by declaring that the note was in default and demanding payment of $300,000 immediately, as well as the surrender of "all assets of the buy/sell agreement."
On November 3, 1999, Prestige filed a complaint in the circuit court seeking the payment it believed to be due. Count I was a claim for breach of contract, alleging that Burns failed to make a payment required by the note. Although Count II is entitled "Fraud," it states nothing more than a claim for a willful breach of contract, with the allegation that Burns "knowingly and deliberately falsified or manipulated the applicable accounts and revenues" to deprive Prestige of "appropriate payment due under the note." Entitled "Breach of Duty of Good Faith," Count III is a breach of contract action contending that if Burns had acted in good faith in computing the customer retention percentage, then Prestige would have been entitled to payments under the note. Count IV, labeled "Unconscionability," fails to state a cause of action. The central issue raised by the complaint concerns the correct calculation of the customer retention percentage. This issue is a "disagreement as to any amount(s) due under this paragraph" within the meaning of the alternative dispute resolution provision quoted above.
Burns filed a notice of removal to federal court on November 23, 1999. The next day, Burns served a motion to compel arbitration. The federal court remanded the case on December 29, 1999, finding that the record before it was insufficient to show a basis for diversity jurisdiction.
After remand to the state court, Burns filed a request for admissions directed at factual issues relating to diversity jurisdiction; it provided that the request was being made "without waiving its right to compel arbitration." On January 26, 2000, Burns served a motion to compel arbitration in the Florida court.
Burns removed the case to federal court on February 10, 2000, and the federal court again remanded the case to state court on March 15, 2000.
The trial court granted Burns's motion to compel arbitration, finding that the alternative dispute resolution clause encompasses all the "well-pled claims"
The note at issue provides that it "shall be governed by and construed in accordance with the internal law (and not the law of conflicts) of the State of Illinois." Because the issues raised on this appeal deal with the construction and application of the alternative dispute resolution clause to which the parties agreed, this court's review is de novo. See Ocwen Fed. Bank FSB v. LVWD, Ltd., 766 So.2d 248, 249 (Fla. 4th DCA 2000).
Both Illinois and Florida law enforce agreements to various forms of alternative dispute resolution, just as binding arbitration agreements are enforced. This is so even though the scope of the dispute resolver's authority may be more limited than that afforded an arbitrator and the proceedings may not resemble a traditional
In Florida Farm Bureau, the first district enforced an insurance policy's requirement for an appraisal the same as it would an agreement to arbitrate:
687 So.2d at 1333. The provision in this case that the parties would submit disputes to an expert auditor, Deloitte and Touche, LLP, is similar to those contracts that resolve valuation disagreements by submission to an appraiser.
Prestige challenges the trial court's rejection of its claim that Burns waived the right to arbitrate. In James Eckmann Assocs., Inc. v. ABC Int'l Traders, Inc., No. 95C650, 1995 WL 324555, reconsidered, 1995 WL 506611 (N.D.Ill.1995), the plaintiff filed suit on a contract in Illinois state court. Without raising the arbitration issue in the Illinois court, the defendant removed the case to federal court based on diversity jurisdiction. About a month after removal, the defendant filed a motion to compel arbitration as its first pleading in the federal court.
The James Eckmann court found that the defendant had not waived arbitration. It noted that another federal decision, Cabinetree of Wisconsin, Inc. v. Kraftmaid Cabinetry, Inc., 50 F.3d 388 (7th Cir.1995), had found a waiver where the defendant did not move for an order on arbitration "at the same time" as it removed the case to federal court. James Eckmann, 1995 WL 324555 at *2. The James Eckmann court found it significant that in Cabinetree, the defendant had waited nine months after removal before dropping "a bombshell into the proceedings" by moving for a stay pending arbitration. Id. at *1.
Under either federal decision, Burns's request for arbitration would be timely.
Prestige argues that it never agreed to submit the particular dispute in question for non-judicial resolution. Illinois law is clear that the parties are bound to arbitrate only those issues which "by clear language" they have agreed to arbitrate. Rauh v. Rockford Prods. Corp., 143 Ill.2d 377, 158 Ill.Dec. 523, 574 N.E.2d 636, 641 (1991); Flood v. Country Mut. Ins. Co., 41 Ill.2d 91, 242 N.E.2d 149, 151 (1968). The trial court found that the disputes contained in the well pled counts of the complaint fell under the arbitration clause.
Prestige argues that under the express language of the dispute resolution clause ("In the event that the parties cannot resolve any disagreement as to any amount(s) due under this paragraph ....") refers only to disagreements about Burns's preparation of the reports, that is the mathematical computations only. Prestige's argument is that by agreeing to that clause, it never agreed to submit disputes about the "legitimacy of the data upon which the report was prepared" that is, the customer and revenue accounts which Burns used to extract the figures used in its computations.
Illinois law recognizes a public policy favoring the submission of disputes to arbitration, but does not allow this policy to be used to extend arbitration beyond the scope of the parties' agreement. See United Cable Television Corp. v. Northwest Ill. Cable Corp., 128 Ill.2d 301, 131 Ill.Dec. 172, 538 N.E.2d 547, 551 (1989). On the other hand, Illinois courts will not deny a request for arbitration "`unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage.'" Amgen, Inc. v. Ortho Pharm. Corp., 303 Ill.App.3d 370, 236 Ill.Dec. 799, 708 N.E.2d 385, 390 (1999) (quoting AT & T Techs., Inc. v. Communications Workers of Am., 475 U.S. 643, 650, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) (quoting United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582-83, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960))).
To support its argument, Prestige relies primarily on this court's recent decision in Ocwen which found that an agreement to arbitrate "whether an item included in Operating Expenses as determined by Landlord was properly includable pursuant to the terms of the Lease" was not broad enough to require the parties to arbitrate the methodology used to calculate the amount of the expense items. 766 So.2d at 249.
Ocwen is inapplicable. First, it applies Florida, and not Illinois, law. Second, the language in the Ocwen arbitration clause was very specific as to what types of disputes were arbitrable; it could not be reasonably read to include an agreement to arbitrate the methodology of calculating "additional rent" under a lease without
In this case, the parties agreed to submit any disputes related to the amount due "under this paragraph"; the paragraph requires Burns to "prepare and deliver" a "detailed report" substantiating the amount it claims is due under the note. Applying the standard used by the Illinois courts, it cannot be said "with positive assurance" that this language could not be reasonably read as including an audit or review of the account information used to prepare the reports.
Prestige next argues that the note's "arbitration" clause was unenforceable since it did not provide sufficient procedural guidelines for the arbitration proceeding. Prestige cites cases from this court and from Illinois holding that for the arbitration act to apply, the arbitration agreement must be sufficient to identify the issues to be submitted for arbitration and to set forth the procedures for arbitration. See Intracoastal Ventures Corp. v. Safeco Ins. Co. of Am., 540 So.2d 162, 164 (Fla. 4th DCA 1989) (discussing an insurance appraisal); Allied Contracting, 66 Ill.Dec. 54, 442 N.E.2d at 328 (dealing with the submission of construction disputes to engineer for resolution).
However, Illinois courts have enforced arbitration clauses that are no more specific about arbitration procedure than the clause in this case. For example, in Himmelstein, the Illinois court enforced the following arbitration clause:
59 Ill.Dec. 542, 431 N.E.2d at 1300. As discussed above, Illinois law recognizes a variety of dispute resolution options which do not have the well defined procedures of more traditional forms of arbitration.
Prestige's final argument is that Burns failed to comply with a condition precedent to invoking the dispute resolution clause because it did not provide copies of documentation to support its computations. No express language in the clause imposes such a condition. Even if such an obligation could be implied, the requirement was waived by Prestige's July 20 declaration of default, without any attempt to "resolve any disagreement" by requesting documentation or otherwise initiating settlement discussions.
WARNER, C.J., concurs.
KLEIN, J., concurs specially with opinion.
KLEIN, J., specially concurring.
I was initially concerned in this case that the parties had not agreed to arbitration as contemplated by Chapter 682, Florida Statutes, and that the majority was being too liberal in allowing a nonfinal appeal under Florida Rule of Appellate Procedure 9.130(a)(3)(C)(v). Under Travelers Insurance Co. v. Bruns, 443 So.2d 959 (Fla. 1984), we must narrowly construe rule 9.130, which authorizes nonfinal appeals.
Blacks Law Dictionary 100 (7th ed.1999), however, defines arbitration as "A method of dispute resolution involving one or more neutral third parties who are usually agreed to by the disputing parties and whose decision is binding." The agreement by the parties in this case to have their dispute resolved by an accounting firm "whose determination will be final and binding" falls within the above definition. I therefore agree that nonfinal appellate review is appropriate at this point, because this procedure is arbitration.