5th DCA’s Stokes Decision sides with the 4th DCA’s Blankfeld

August 21, 2006

Permalink 12:09 pm, by Christopher HOPKINS Email , 908 views

5th DCA’s Stokes Decision sides with the 4th DCA’s Blankfeld

The 5th DCA issued SA-PG-Ocala, LLC v. Mary Frances Stokes on August 11, 2006 and it appears to bring another Florida intermediate appellate court into a brewing conflict over (1) public policy and unconscionability analysis of remedial limitations and (2) whether the court or the arbitrator decides. FAL.com is in the process of obtaining the briefs, as we question whether the 5th DCA considered the Bland v. Healthcare decision from the 2nd DCA. Our concerns about conflict are addressed below. Look for our future post with copies of the briefs.

In Stokes, a nursing home resident signed an admission agreement with an arbitration clause. The court did not quote the clause but it appears that any claim or controversy was to be resolved under rules of the American Health Lawyers Association (AHLA). Presumably, it is the same clause which the 4th DCA previously shot down in Blankfeld and Digati which disallows an award of “consequential, exemplary, incidental, punitive or special damages.” For those interested, read Briarcliff v. Turcotte involving the failed claim that the AHLA organization was biased.

The 5th DCA considered the foregoing remedial limitation and then the 4th DCA’s Blankfeld decision which said this limitation “would be against public policy” (5th DCA’s words). The appellant/defendant argued that the 5th DCA should have the arbitrator decide whether this was unconscionable. The 5th disagreed, holding that it was the court’s role to determine if a valid agreement to arbitrate exists and, in this case, found it unconscionable.

The 5th DCA distinguished the 2nd DCA’s Rollins v. Lighthouse Bay Holdings claiming that, in Rollins, the 2nd DCA held the clause was not unconscionable. Here, the 5th DCA says “the arbitration agreement does not survive the threshold determination of validity.”

Without question, this decision is a blow to corporations who have remedial limitations in the arbitration agreements. But is it the right ruling and what problems does it create (or avoid)?

1. In Rollins, the 2nd DCA did find that the agreement was not unconscionable. So the 5th DCA is right in its “close reading.” However, the test of unconscionability requires BOTH procedural and substantive unconscionability. The Stokes decision says nothing about procedural unconscionability even if the 5th did find substantive unconscionability in the arbitration agreement language. So the 5th DCA appears to be (improperly) invalidating an agreement to arbitrate ONLY on substantive grounds.

2. The Stokes opinion says nothing about the 2nd DCA’s follow-up to Rollins in Bland v. Healthcare. In that case, the 2nd DCA pointed out that “public policy and unconscionability concerns, albeit based on similar facts, are distinct issues.” If the 5th DCA in Stokes follows Blankfeld in that the wording of the agreement is against public policy this does not make it unconscionable (BOTH procedural and substantive). The distinction between public policy analysis and unconscionability is not clear in Stokes. This is not surprising, since the public policy analysis upon which Stokes is based has a blurred history in the 4th DCA’s opinions (see Emerging Trends).

3. More on Bland: the 2nd DCA also noted in Bland that “our precedent precludes us from assessing remedial limitations under the substantive unconscionability rubric.” It appears we have a conflict between the 2nd and 4th/5th DCAs on this issue. The 5th DCA does not seem to preclude itself from assessing the remedial limitations in Stokes. Interested readers should consider the 4th DCA’s opinion in Lacey which compares the same arbitration agreement as in Bland – with an opposite outcome. Read these decisions and decide for yourself whether there is a conflict between the DCAs.

4. More on this “close reading” of Rollins by the 5th DCA: note that Rollins mentioned and considered cases where there were “remedial limitations in arbitration agreements” (emp. ours) and cites cases with various foreclosing remedies. Are courts going to claim that remedial measures are “incorporated” into the agreement to arbitrate based upon the wording of each arbitration agreement? (i.e., if the limitation is in the same sentence, paragraph or page as the agreement to arbitrate). Would it be OK to have one paragraph be the agreement to arbitrate and then move the remedial limitation to another paragraph? Or will the courts consider that there is a broad agreement to arbitrate (recall, public policy supports that) and then any remedial limitation thereon should be considered by arbitrators (at least per Rollins / Bland and the federal courts). For more on this, see Emerging Trends.

5. The blurring of federal and Florida law: Rollins was considering an arbitration governed by federal law. Blankfeld appeared to be following Florida law (at least they cited Florida cases most of which relied on the Florida Arbitration Code). Bland seems to be based upon the Florida Arbitration Code (as cited in the agreement). Stokes doesn’t indicate whether it is applying the FAA (federal) or the FAC (state) law. If the 2nd and 5th DCA are right that “valid arbitration agreements” are considered by the courts and then remedial limitations are considered by the arbitrator, isn’t that a conflict with the 4th DCA’s line of cases in Lacey, Blankfeld, and Romano?

Will one of the DCA’s finally step up and admit there is a conflict?

Author: Christopher Hopkins from www.FloridaADRLaw.com
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