Arbitration agreements can be considered to be a contractually advantageous alternative form of dispute resolution. Parties may enter into arbitration agreements to prevent lengthy civil litigation proceedings and reduce costs. However, an arbitration clause may subsequently be considered “fine print” by aggrieved parties who feel that they entered into a contract without understanding that they were agreeing to potentially limit the amount of their recovery, appellate review, discovery, fees, and enforcement of judgments.
Arbitration can reduce exposure to the realm of civil litigation; therefore, the Florida Supreme Court was recently required to address whether the civil statute of limitations applied to arbitration agreements. In Raymond James Financial Services v. Phillips, 126 So. 3d 186 (Fla. 2013), an office manager “invested his clients’ assets into allegedly non-diversified, high risk equities, which caused the investments to lose significant value.” Id. at 188. The clients’ contract stated that “[a]rbitration is final and binding on the parties. The parties are waving the right to seek remedies in court, including the right to trial by jury.” Id. Additionally, the contract stated that the agreement between the parties would not “waive the application of any relevant state or federal statute of limitation” and that any claim “which is time barred for any reason shall not be eligible for arbitration.” Id. The allegedly harmful investments were made in 2000, and the clients filed a claim for arbitration for financial recovery in 2005.
Raymond James filed a motion to dismiss because the claim was filed outside the four-year statute of limitations provided for in section 95.11, Florida Statutes. The clients argued in response that the “statute of limitations does not apply to arbitration, but applies only to judicial actions.” Id. at 189. The Supreme Court engaged in statutory interpretation in order to determine whether the definition of “civil action or proceeding,” under section 95.011, included arbitration proceedings. Id. at 190. The court analyzed various statutory provisions and determined that arbitration should have the same value as a civil proceeding because “an arbitrator would fall under the definition of an adjudicator, which Black’s Law Dictionary defines as ‘[a] person whose job is to render binding decisions.’ ” Id. at 191.
Significantly, the court found that section 95.03 was an important factor in requiring that Florida’s statute of limitations cannot be contracted away or diminished because diminishing the statutory rights of aggrieved parties would cause a contract to be void. Additionally, allowing an indefinite period of time to pass prior to filing an arbitration claim would provide a plaintiff with “an opportunity to enforce an unfresh claim against a party who is left to shield himself from liability with nothing more than tattered or faded memories, misplaced or discarded records, and missing or deceased witnesses.” Id. at 192. Therefore, the Supreme Court held “that Florida’s statute of limitations applies to arbitration because an arbitration proceeding is within the statutory term ‘civil action or proceeding’ found in section 95.011.”
