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There is a split of authority among Florida courts on the issue of whether the court or arbitrator should decide the enforceability of remedial limitations in an arbitration agreement. Most recently, a Florida District Court of Appeal decided the enforceability question in holding that a nursing home’s arbitration agreement was void as contrary to public policy because it substantially limited the patient’s remedies under the Nursing Home Residents’ Act.
In SA-PG-Ocala, LLC v. Stokes, Nos. 5D05-3776, 5D05-3777, 2006 WL 2347369 (Fla. Dist. Ct. App. Aug 11, 2006), Stokes signed an arbitration agreement in connection with her admission to a nursing home. Under the designated rules of arbitration, an arbitrator could not award “consequential, exemplary, incidental, punitive or special damages” unless the claimant demonstrated “by clear and convincing evidence” intentional or reckless misconduct.
The Court held that the remedial limitations rendered the arbitration agreement unenforceable because “[i]t would be against public policy to permit a nursing home to dismantle the protections afforded patients by the Legislature through the use of an arbitration agreement.”
The nursing home argued that the arbitrator should determine the validity of the remedial limitations. The Court disagreed, noting the validity of an arbitration agreement is a “threshold determination.” The Court also rejected the nursing home’s argument that the remedial limitations should be severed from the agreement, mainly because there was no severability clause.
In Bland, ex rel. Coker v. Health Care and Retirement Corp. of America, 927 So.2d 252, (Fla. Dist. Ct. App. 2006), another Florida District Court of Appeal came to the opposite conclusion regarding an arbitrator’s authority to decide the enforceability of remedial limitations. In Bland, the court found “no reason why the arbitrator, in the first instance, cannot decide whether to enforce the remedial limitations.”
Whether by the court or by the arbitrator, arbitration agreements with remedial limitations are carefully reviewed to ensure that the agreement does not “prohibit or substantially limit a person from enforcing and vindicating rights and protections or from seeking and obtaining statutory or common-law relief and remedies that are afforded by or arise under state law that exists for the benefit and protection of the public.” Am. Gen. Life & Accident Ins. Co. v. Wood, 429 F.3d 83, 89 (4th Cir. 2005).
The most effective way to avoid this type of litigation is to incorporate by reference a set of arbitration rules that allows the arbitrator to award all remedies available under applicable law. See, e.g., National Arbitration Forum Code of Procedure Rule 20D.
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