Who Decides if a Dispute Is Subject to Arbitration?
Florida Supreme Court: Adopting Arbitration Rules That Empower Arbitrators to Decide Arbitrability Constitutes "Clear and Unmistakable" Evidence of Agreement to Delegate
- The Florida Supreme Court on March 31, 2022, found that the incorporation by reference of the American Arbitration Association (AAA) arbitration rules in Airbnb's Terms of Service constitutes clear and unmistakable evidence of the parties' intent to delegate questions of arbitrability away from the court and to the arbitrator.
- This decision shows the importance of paying careful attention to the language of arbitration agreements to ensure they reflect the true intent of the parties and avoid issues by specifying key points in the agreements.
This alert was republished by The American Law Institute in The ALI Adviser.
The Florida Supreme Court on March 31, 2022, found that the incorporation by reference of the American Arbitration Association (AAA) arbitration rules in Airbnb's Terms of Service constitutes clear and unmistakable evidence of the parties' intent to delegate questions of arbitrability away from the court and to the arbitrator. Airbnb, Inc. v. Doe, No. SC20-1167, 2022 WL 969184, at *5 (Fla. Mar. 31, 2022).
This decision shows how important it is for parties to pay careful attention to the language of their arbitration agreements to ensure they reflect the true intent of the parties and avoid issues by specifying key points in the agreements.
Under First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995), the U.S. Supreme Court held that courts – and not arbitrators – must decide questions of arbitrability unless there is clear and unmistakable evidence of the parties' intent to submit questions of arbitrability to the arbitrators. Following First Options, 11 of the 12 federal circuit courts of appeal have found that the incorporation by reference into an agreement to arbitrate of arbitration rules empowering arbitrators to decide arbitrability evidences the parties' clear and unmistakable intent to have the arbitrators, and not the courts, determine arbitrability.
In 2016, a couple from Texas (John Doe, et al.) rented a condominium unit in Florida using Airbnb. The unit was owned by Wayne Natt, who, according to the Does, secretly recorded the Does' entire stay in his unit. The Does sued both Natt and Airbnb in tort, claiming intrusion and loss of consortium. Airbnb moved to compel arbitration, arguing that under Airbnb's terms of service, the Does and Airbnb agreed to arbitrate any disputes arising from the rental under AAA rules, which delegate issues of arbitrability to the arbitrator. Airbnb argued this reference provides "clear and unmistakable" evidence of the parties' intent to delegate questions of arbitrability away from the court and to the arbitrator. Among other things, the Does argued that the mere incorporation by reference of AAA rules into Airbnb's terms and conditions did not evidence delegation of the question of arbitrability to the arbitrator.
The trial court sided with Airbnb, but the Florida Second District Court of Appeal reversed. Doe v. Natt, 299 So. 3d 599, 607 (Fla. Dist. Ct. App. 2020), review granted sub nom. Airbnb, Inc. v. Doe, No. SC20-1167, 2021 WL 798838 (Fla. March 2, 2021), and quashed and remanded sub nom. Airbnb, Inc. v. Doe, No. SC20-1167, 2022 WL 969184 (Fla. March 31, 2022). In a 2-1 decision, the Second District found that "the clickwrap agreement's arbitration provision and the AAA rule it references that addresses an arbitrator's authority to decide arbitrability did not, in themselves, arise to 'clear and unmistakable' evidence that the parties intended to remove the court's presumed authority to decide such questions." Natt, 299 So. 3d at 609-10. Because the Third and Fifth District Courts of Appeal had reached the opposite conclusion on the question of arbitrability, the Florida Supreme Court accepted jurisdiction over the appeal.
Florida Supreme Court Decision
On March 31, 2022, the Florida Supreme Court quashed the Second District's opinion and held that incorporating by reference arbitration rules that empower arbitrators to decide arbitrability amounts to clear and unmistakable evidence of the parties' intent to remove such authority from the court and delegate it, exclusively, to the arbitrators.
In reaching its decision, the Court sought to prevent Florida from becoming an "outlier" because all of the U.S. federal circuit courts of appeal to consider the issue have consistently "agreed that incorporation by reference of arbitral rules into an agreement that expressly empower an arbitrator to resolve questions of arbitrability clearly and unmistakably evidences the parties' intent to empower an arbitrator to resolve questions of arbitrability." 2022 WL 969184, at *4.
The Court made no mention that its decision is at odds with the Restatement of the U.S. Law of International Commercial and Investor-State Arbitration. Professor George A. Bermann, chief reporter of the Restatement, filed an Amicus Brief in support of the Does, addressing, among other things, how "after lengthy deliberations, the [American Law Institute] membership in May 2019 unanimously endorsed the view that the presence of competence-competence language in incorporated rules of procedure fails to meet the First Options test." Brief for George A. Bermann as Amicus Curiae Supporting Respondents at 21, 2022 WL 969184 (citing to Restatement of the U.S. Law of Int'l Commercial and Investor-State Arb. § 2.8, art. b, Reporter's n. b (iii), (Am. L. Inst. 2019).).
The Miami International Arbitration Society (MIAS), on the other hand, filed an Amicus Brief in support of Airbnb. MIAS requested "the Court reverse the Second District Court of Appeal and hold – in line with virtually every court that has addressed this issue – that adopting arbitration rules that empower the arbitrator to decide his or her own jurisdiction constitutes 'clear and unmistakable' evidence that the parties agreed to arbitrate arbitrability," as the Court ultimately did. Brief for Miami International Arbitration Society as Amicus Curiae Supporting Petitioner at 20, 2022 WL 969184.
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