Are Florida courts really parochial when it comes to arbitration? A rebuttal.

• Jurisdiction: United States
• Author: Matthews, Joseph M.
• Date: 01 December 2007

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In the February 2007 edition of The Florida Bar Journal, Douglas J. Giuliano authored an article "Parochialism in Arbitration? How Some Arbitration Decisions by Florida Courts Are at Variance with Federal Arbitration Precedent." The title and the article suggest that this variance is the result of parochialism (1) by Florida courts. While acknowledging the significant differences between Florida courts and the U.S. Supreme Court, this rebuttal suggests that the disconnect between the Florida Supreme Court and federal courts--particularly the U.S. Supreme Court--regarding arbitration is more accurately understood as the consequence of a slow but massive change in federal case law interpreting what was originally a simple procedural statute, the Federal Arbitration Act of 1925, 9 U.S.C. [section]1, et seq.

This article also observes that the swing toward arbitration has probably reached that point in the arc of the pendulum at which its momentum has almost certainly diminished. In fact, the U.S. Supreme Court expansion of the FAA has pushed the U.S. past most other developed nations, particularly those in Europe, with respect to this dispute resolution technique, which is the primary means of resolving disputes in the international arena.

As a result, it is likely that Congress will attempt to legislatively retreat from the Supreme Court's judicial expansion of this venerable statute. Hopefully, the role of arbitration in our system of civil dispute resolution will settle back into a state of equilibrium with our federal and state civil justice systems, and we will not see an equally massive and potentially more disruptive backlash against arbitration as a method for resolving disputes.

This article first seeks to place the topic in a broader historical context than that presented by the parochialism article. It then briefly analyzes the three primary areas in which federal courts have extended arbitration well beyond its historic domain--litigation of statutory rights, consumer litigation, and class actions. Finally, it identifies some significant potential legislative backlash or at least retrenchment in arbitration law at the federal level that may well prompt significant legislative revisions to the FAA.

Historical Perspective

Members of The Florida Bar who began practicing prior to 1986 have a completely different view of a legal doctrine known as the economic loss rule than those who became members of the Bar after the turn of the 21st century. Younger members of the Bar probably studied it in law school. Older members saw development of the economic loss rule as the creation of a legal doctrine out of whole cloth and observed that doctrine as it achieved near constitutional status. (2) It has since settled back into equilibrium with other well-established tort and contract doctrines. Prior to the 1986 decision of the U.S. Supreme Court in East River Steamship Corp. v. Transamerica Delaval, Inc., 476 U.S. 858 (1986) (where Chief Justice Rehnquist famously expressed his concern that the law of contract might "drown in a sea of torts"), and the decisions of the Florida Supreme Court in Florida Power & Light v. Westinghouse Electric, Inc., 510 So. 2d at 899 (Fla. 1987), and AFM Corp. v. Southern Bell Tel. & Tel. Co., 515 So. 2d 180 (Fla.1987), few lawyers and even fewer courts had ever heard of the doctrine. In less than 15 years, this judicially created rule became so prominent in Florida that one intermediate appellate court actually gave it the power to deny claimants recovery under statutorily created remedies. (3) The Florida Supreme Court, adopting the dissent of Judge Gerald Cope of the Third DCA, reigned in the economic loss rule in Comptech Intern., Inc. v. Milam Commerce Park, Ltd., 753 So. 2d 1219 (Fla. 1999), and subsequent decisions.

In much the same way that proponents of the economic loss rule vested it with near constitutional gravitas sufficient to reject the right of the state legislature to create remedies, the U.S. Supreme Court has done the same with respect to the FAA to preempt state arbitration laws and to apply in areas never contemplated by those involved in its adoption. The parochialism article fails to put the decisions of the U.S. Supreme Court into their proper historical context while characterizing the courts of Florida as "parochial" for being out of step with those Supreme Court decisions. While the conclusion that Florida law was out of step with several landmark arbitration decisions of the U.S. Supreme Court is undeniably accurate, the conclusion that this is the result of parochialism on the part of Florida courts is not.

In a law review article recently published in the Florida State University Law Review, Professor Margaret L. Moses of Loyola University Law School reviews the history of U.S. Supreme Court decisions construing the FAA, including those landmark decisions upon which the parochialism article begins its analysis. Her article, entitled "Statutory Misconstruction--How the Supreme Court Created a Federal Arbitration Law Never Enacted by Congress," begins with the following assessment of the Supreme Court's treatment of the FAA:

This [a]rticle will focus on how a simple procedural statute enacted to require enforcement of arbitration agreements in federal court has become unrecognizable as the law Congress adopted in 1925. Today, as a result of judicial construction, the Federal Arbitration Act (FAA) reaches much further and imposes itself on a far greater proportion of our citizens than was ever envisioned in 1925. The FAA as interpreted affects statutory rights, consumer rights, and employee rights, as well as state police powers to protect those rights. Today's statute--which has been construed to preempt state law, eliminate the requirement of consent to arbitration, permit arbitration of statutory rights, and remove the jury trial right from citizens without their knowledge or consent--is a statute that would not likely have commanded a single vote in the 1925 Congress.... (4)

Professor Moses analyzes key Supreme Court decisions in light of the legislative history of the FAA (5) and observes numerous inconsistencies. For example, with respect to whether Congress intended the FAA to preempt states from adopting their own laws relating to arbitration, (6) her research includes reference to the brief submitted in support of the bill by one of the primary proponents of the FAA, Julius Cohen, (7) a lawyer who served as general counsel for the New York State Chamber of Commerce. Mr. Cohen made it crystal clear that the purpose of the FAA was not to affect the rights of states to fashion their own law of arbitration. (8)

As for the application of the FAA to contracts of adhesion, such as the "pay day loans" involved in Buckeye Check Cashing, Inc. v. Cardegna, 126 S....